While the specific tax implications will vary for each person, depending on their larger tax picture, below is the general breakdown of how tax returns are impacted by child support payments.
Is Child Support Taxable?
Parents who receive child support need to know how that money will affect their taxes. Is child support taxable? Will I owe more taxes this year because of collecting child support? In short, the answer to both questions is no. The U.S. government does not consider child support to be a form of taxable income, so it will not add your bottom line when your tax bill is calculated. While you may think of child support as part of your regular income, the government sees it differently. We pay income tax on the money we earn. Child support is money you receive on behalf of your kids. Therefore, it’s not technically earned income that’s subject to income tax. Plus, this money has already been taxed on the child support payer’s tax bill.
Is Child Support Tax Deductible?
The flip side is that for child support payers, these child support payments are not deductible, which means the payer owes tax on the income used to fund child support payments, just like any earned income. Thus, if you pay child support for your children, you cannot deduct the child support to adjust your taxable income. The bottom line is that while the recipient does not pay tax on this money, the payer does. While that may not be the answer you’d hoped for, don’t lose sight of the fact that providing financial support to your children is meaningful and contributes to their well-being every day. Additionally, it’s important to note that the tax status of custody support is no different than on the rest of your income. In other words, all of the relevant income used to pay for your child’s needs is taxed the same as any other non-deductible expense you pay for, so you are not facing a larger tax burden due to paying child support.
Can I Claim My Kids as Dependents?
Some parents who pay child support can count their children as dependents, which comes with some tax benefits. If your children live primarily with you or lived with you for more than half the year you are paying taxes, you may be able to file your income taxes with Head of Household status and claim them as dependents. If it does turn out that you can claim your kids as dependents, then the money you pay for childcare may also make you eligible for a 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. In some cases, parents who have the right to claim their children as dependents (normally this is the parent with the larger share of physical custody) will opt not to. If this happens and your child’s other parent is willing to file Form 8332 with the Internal Revenue Service (IRS), then you can claim your children as dependents in their place.
A Word From Verywell
If you’re ever unsure about your specific tax situation, it’s advisable to consult a certified public accountant (CPA) to clear up your concerns. Knowing the tax status of your child support payments (for both the payor and the recipient), as well as your larger tax and financial status, enables you to have a clearer picture of how child support will impact your bottom line. Plus, the more informed you are about your financial picture, the greater your peace of mind is likely to be—and you’ll be better equipped to navigate your financial life and achieve your economic goals.
