The subject of child support is quite sensitive, and when you add tax issues, it becomes more complicated. If you’re battling with questions regarding child support payments and how it may affect your taxes, you’re not alone. Several single parents who pay or receive child support aren’t sure about the impact on their taxes.
We’ll answer some questions regarding child support and the tax relationship, to help you understand your situation. You can also consult child support lawyers in Media PA, to further enlighten you on the tax implications.
Is Child Support Taxable for the Recipient?
Child support payments are not regarded as income in the US and, therefore, not taxable. To further explain, child support isn’t an earning; instead, it’s money you receive on behalf of your child. Thus, the government doesn’t expect you to pay income tax on such payments. Similarly, alimony payments established after January 1, 2019, are not subject to taxes.
If you’re a parent receiving child support, you don’t have to report the payment as part of your income when filing your tax. Your child doesn’t have to declare the money as an income, any more than he’d report his allowance to the IRS.
Is Child Support Tax Deductible for the Payer?
On the flip side, child support payment isn’t tax-deductible from the payer’s income. It means that the parent paying child support can’t deduct child support payments from his income before paying taxes.
For instance, if you purchase a new set of clothes for your child, you can’t claim tax deductions for the cost. Such expenses are personal, and you can’t deduct taxes on personal expenses. Child support payment is similar to buying clothes for your child. The only difference is that you’re giving the money to your co-parent, who’ll make the expense.
Irrespective of your child support obligations, you must report all income you earn to the IRS and pay taxes on such. Furthermore, you can always discuss your tax issues related to your obligations, with experienced child support lawyers in Media, PA.
Who Should Claim the Child as Dependent?
Only one parent can claim the child as a dependent when it comes to receiving certain tax benefits when filing returns. These benefits include head of household filing status, child and dependent care tax credit, and earned income tax credit. They may provide a form of a tax break for the parent who claims the child.
However, an issue that may arise is which parent should claim the child as a dependent for the tax year. Most times, it’s the custodial parent or the parent the child spends the most time with that’s eligible to claim the child. If custody is shared equally, the parent with the highest adjusted gross income may make a claim. Sometimes both parents may make the claims alternatively each year.
If you are the non-custodial parent, it’s not entirely impossible to claim your child on your taxes. You may need to discuss with your co-parent, who must willingly sign a Form 8332 with the IRS. This waiver, attached to your tax return, will enable you to claim in the custodial parent’s stead.
Child support payments are neither taxable nor tax-deductible for the recipient and payer, respectively. As such, any party paying child support must declare their full income and can’t deduct any taxes. On the other hand, a recipient parent mustn’t report or pay taxes on payments received.
To learn more about child support and tax implications, contact child support lawyers in Media, PA.