Understanding how child support and taxes work can be confusing after a recent divorce. Laws vary by state, and most use specific calculators to establish the monthly amounts of child support.
What Should I Know About Child Support?
Every parent is required by law to financially support their children. This amount is based on the amount of time the parent spends with the child, income, medical costs, daycare, and other expenses.
In most cases, the non-custodial parent pays the custodial parent the child support to assist with daily living costs, such as food, schooling, extracurricular activities, and other necessities. The non-custodial parent cannot tell the custodial parent how to spend the monthly payments.
Child Support Payments and Taxable Income
The Internal Revenue Service (IRS) does not classify child support payments as taxable income, so they are not deductible for paying parents and are not taxable for the receiving ones. Parents who pay child support should not include it on their tax returns because it is deemed as a tax-neutral item.
This can be frustrating, but the IRS looks at child support as personal expenses. When the non-custodial parent gives the custodial parent the funds, it is supposed to be used for clothing, housing, and for other things that are needed to support the children. Personal expenses are not tax-deductible.
Dependents and Deductions
It may be possible to claim a child as a dependent. Usually, the custodial parent can claim the exemption if exemption tests are met. Non-custodial parents may be able to claim the exemption if they have paid over half of the child support. In these cases, the custodial parent must sign a Release of Claim to Exemption for Child of Divorced and Separated Parents form.
To claim a child as a dependent, that child must live with the parent for the final six months of a tax year. When both parents provide equal support, some parents will alternate and claim the child as a dependent by odd and even years, or work out other arrangements.
Some parents who are responsible for the costs of health care, child care, and educational costs can deduct these expenses on their yearly tax returns. This depends on if they meet specified financial thresholds. The credit received is not enough to pay for everything, but it can provide some help.
What if I Owe Child Support Payments?
When parents lag behind on their child support payments, the IRS can step in. In some cases they will redirect federal tax refunds, which are then sent over to the custodial parent. These are handled by the Federal Tax Refund Offset Program, but not every delinquent child support case is eligible. It depends on how much money is owed and which state the parents live in.
How Can a Lawyer Help?
If a parent has concerns about child support and taxes, they should contact a lawyer. A knowledgeable attorney should be able to thoroughly answer all of their client’s questions. Additionally, a lawyer can help with modifications to child support.
Bel Air Child Support Lawyers at Huesman, Jones & Miles, LLC Help Divorced Parents with Child Support and Tax Issues
If you are struggling with child support and tax issues, reach out to one of our skilled Bel Air child support lawyers at Huesman, Jones & Miles, LLC. We solve issues related to child support. For a free consultation, contact us online or call us at 443-589-0150. Located in Hunt Valley and Towson, Maryland, we proudly serve clients throughout Baltimore, Baltimore County, Bel Air, Bentley Springs, Columbia, Freeland, Hereford, Hampton, Westminster, Essex, Monkton, Sparks Glencoe, Parkton, Phoenix, Pikesville, White Hall, Carroll County, Harford County, and Howard County.
