By Nelson Garcia, 301.563.6685
People often ask me how does child support affect their taxes, with the most common specific questions being the following:
Is Child Support Tax Deductible or Taxable?
The answer to this question is always simply No. Child support is considered “tax neutral.” That’s because child support is considered payments for expenses of the child. As such, if you are the Payor they are treated the same as if you had paid them yourself. The only difference is that, instead of making purchases yourself, you’re giving them money to your ex so they can cover expenses for your child. They are considered a personal expense for tax purposes, so they are not deductible.
The same is true for alimony today if it was awarded after January 1, 2019. If so, one cannot deduct alimony paid to a former spouse. But if you started paying alimony by either agreement with your former spouse or court decree and you were divorced prior to Jan. 1, 2019, then your alimony payments can be deducted; also, in such an event, they must be included as income by your former spouse.
Are Any Other Tax Benefits Available?
Another typical question asked by non-custodial parents paying child support is whether there are any other IRS deductions or credits available to them?
There are certain situations where the non-custodial parent paying child support may still be able to take advantage of other IRS deductions and credits related to their minor children. It is very strongly recommended for such clients to consult a certified public accountant (CPA) to analyze these suggestions and to cover any others that may be applicable to their specific situation. But as a general rule of thumb I advise them of the following common possible credits and deductions:
IRS Form 8332. The general rule is that only the parent with primary custody of the child can claim the child as their dependent. However, the non-custodial parent may claim the child as their dependent if there is a written and signed statement by the custodial parent giving them that right. In such a case, the custodial parent can just sign an IRS Form 8332, which will allow the non-custodial parent to claim the child on their tax return. The non-custodial parent then attaches the signed Form 8332 when they file their return. This allows them to claim the dependent exemption and the Child Tax Credit.
Child and Dependent Care Tax Credit. Note that only one parent can claim a child (and any accompanying tax breaks) in any one tax year. Therefore, if it does turn out that you can claim your kids as dependents, then the money you pay for childcare may also be deducted. Such would include Child and Dependent Care Tax Credit if your income is below the benefit threshold. In this case, some portion of relevant childcare expenses, such as daycare, babysitters, camps, and after school care, may provide an additional tax break.
Again, all clients are very strongly recommended to consult a certified public accountant (CPA) to confirm if any of the above-described deductions and credits, as well as any others (such as the earned income credit), are applicable to your specific financial situation, and to clear up any other tax-related concerns you may have. Knowing your overall tax and financial status, enables you to have a clearer picture of how child support will impact your bottom line.
One of the most rewarding aspects of being a Family Law Attorney is educating my clients about how to best present their case, whether for settlement or trial. But although the contested custody process can be tough, it doesn’t always have to involve stressful, expensive litigation and the overwhelming majority of my custody cases settle. Whether children are minors or adults, children benefit when their parents can settle their differences.
I know how complex and sensitive matters involving divorce and children can be. If you have questions or need compassionate legal guidance about a child custody matter, please contact me today.
About Andalman & Flynn, P.C.: Founded in 1998 in downtown Silver Spring, Maryland, Andalman & Flynn has forged a distinguished reputation for legal excellence. The firm represents individuals seeking disability benefits throughout the country and practices family law throughout Maryland and the District of Columbia. The firm focuses on cases that impact the rights of everyone, and are there for clients when responsive legal help is most critical. The firm has provided legal analysis on national and local television and radio, and their attorneys often testify before legislative bodies and are routinely invited to contribute to prominent legal publications. For more information about Andalman & Flynn, please visit the website at andalmanflynn.com or call 301.563.6685