Does child support fall under the ambit of tax deductible? How does child support impact your tax returns? Who can get the children (Dependency Exemption & Child Tax Credit) on their taxes? Is the child support you are getting taxable? It is very normal for these questions to arise regarding child support.
Child support comes with a lot of implications, and this blog will discuss them in detail.
Can You File Child Support on Taxes?
The IRS department does not allow paying parents to avail of tax deduction benefits. However, one of the two parents can avail of a dependency exemption on the child. It is up to the parents to decide who will get the exemption. If you can’t agree, the court will decide for you.
The court will devise a fair schedule based on the proportionate share of each parent’s income available to support the child (or children).
However, the tax exemption does not apply to all situations. If you are the parent with the present right to take a dependency exemption, and you get no tax benefit from availing the exemption, then the other parent can avail it.
Similarly, a court can remove a parent’s right to claim a dependency exemption if the parent misses child support payments regularly.
Which parent gets to claim child on taxes?
In most cases, the parent who provides the primary physical care for the child for the greater number of nights during the tax year gets to claim them as a dependent for tax purposes. However, here’s a breakdown of different scenarios:
General Rule:
- Custodial parent: Usually the one with whom the child lives the most days of the year. They can claim the child as a dependent and receive associated tax benefits like the child tax credit.
Other factors:
- Equal nights: If both parents have the child for an equal number of nights, the parent with the higher adjusted gross income (AGI) gets to claim the child.
- Special rule for divorced/separated parents: If your child has a different custodial parent each year under a specific custody agreement, a Form 8332 can be signed by the custodial parent allowing the other parent to claim the child for that year.
Exceptions:
- Emancipated child: A child who turns 18 or older and meets financial independence criteria is no longer a dependent, regardless of who they live with.
- Multiple children: If both parents have one or more children who qualify as dependents, they can each claim one child, depending on the above rules.
Things to note:
- The non-custodial parent (usually the paying parent) may be able to claim the child as a dependent for tax purposes if they meet certain requirements, even if they are not paying child support.
- Child support orders may specify whether the non-custodial parent can claim the child as a dependent.
- It’s crucial to consult with a tax advisor to understand the specific tax implications of your child support situation, as individual circumstances can vary.
Can 2 parents claim the same child on taxes?
Generally, no, two parents cannot claim the same child on their separate tax returns in the US.
Understanding Child Support and Taxes
The IRC clearly distinguishes between child support and alimony because, until recently, alimony and spousal support were tax deductible. Divorce agreements entered into and divorce decrees issued on or after January 1, 2019, are no longer entitled to the alimony tax deduction under the Tax Cuts and Jobs Act (TCJA).
Do We Have to Report Child Support Payments as Income?
Technically, no. Your child support payment does not fall under the ambit of receiving the parent’s taxable net income. While filing your taxes, you don’t have to declare the child support payments that you get.
How Does Child Support Affect Tax Returns?
If you missed a child support payment, the state can transact it from your bank account. It can also be removed from the tax refund shared by the state child support agency.
Child Support in Arrears
In the case that you didn’t win custody of the child, you will have to pay child support timely. This loosely translates to you owing a child support debt. Naturally, people owe interest on their debts. If you miss child support payments multiple times, you will end up with arrears eventually.
Conclusion
Typically, child support is incurred by one parent to the other, generally the parent who has custody. However, both parents are legally accountable for the child’s upbringing, irrespective of their marital status. Check out Beem to get the best online tax filing assistance for any deadline or extension and avail the maximum refund on your return.
FAQS
Who pays taxes on child support?
None of the parent’s child support payments are deductible for the payer, nor do they imply any tax to the receiver’s net income.
When will Child Support receive my refund?
When you miss paying for child support, the court can seize your state and federal tax refunds instead of your child support payments.
Will Child Support take my refund?
Yes, in case you missed making the child support payments.
How can I stop child support from taking my refund?
By making child support payments timely.
