Child support is a Nontaxable Event
Child support payments are not taxable. That means the parent making the payments cannot deduct them from income and their receipt is tax free to the parent who gets the payments on behalf of their children. To meet the definition of child support payments, the payments must be so designated in a divorce or separation agreement. “Family support” payments will be treated like alimony and taxed as income to the recipient unless the agreement under which they are paid specifically designates a portion or amount as child support.
Child Support and Dependency
Even though the payment and receipt of child support does not create a tax event in and of itself, there is an important tax consequence related to child support payments: who gets to claim the children as dependents in order to receive the dependency exemption?
The IRS says that you must provide more than half of a person’s total support in a calendar year to claim an exemption based upon dependency. In order to resolve dependency questions about the payment of child support, the IRS has created a special rule that controls the circumstances of how and when the payment of support creates an exemption. The rule applies when:
- The parents are divorced or legally separated under a decree of divorce or separate maintenance, separated under a written separation agreement or living apart at all times during the last six months of the calendar year
- One or both parents provide more than half the child’s total support for the year
- One or both parents have custody of the child for more than half the calendar year
- A written declaration signed by the custodial parent stating that he or she will not claim the child as a dependent; or
- A signed decree or agreement executed after 1984 that states the custodial parent will not claim the exemption for the tax year and the non-custodial parent attached the appropriate documentation to his or her return; or
- A signed decree or agreement executed before 1985 that provides for the non-custodial parent to claim the exemption along with a statement that at least $600 was in fact given in support to the child, unless there is a modification to the pre-1985 agreement that says that provision doesn’t apply
Non-custodial parents must attach the appropriate agreement or written declaration to their taxes. The written declaration must be made in a format that follows a particular form.
Talk to a Child Support Lawyer
Tax issues concerning support payments and dependency status can be complex. An attorney experienced in these areas can be an invaluable asset. Contact The Mandel Law Firm in New York, New York, for more information today.
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