Tax Laws and Child Support
Child support is money that one parent pays to the other to assist with child-related expenses. A court order or a written agreement usually determines the amount and schedule of these payments. Child support payments are not considered taxable income for the parent receiving them. Meanwhile, the parent paying child support does not deduct these payments from taxable income.
Suppose that a court order requires Parent A to pay $500 per month ($6,000 per year) in child support to Parent B. Parent A earns $70,000 per year, while Parent B earns $40,000 per year. When filing taxes, Parent A reports $70,000 of taxable income, and Parent B reports $40,000 of taxable income. The child support amount doesn’t affect what either of them reports.
Separating Child Support From Spousal Support
Spousal support is separate from child support. For divorces or legal separations finalized before January 1, 2019, the recipient of spousal support reports it as taxable income, and the paying spouse may deduct those payments. For cases finalized after December 31, 2018, spousal support is not deductible by the payer and is not taxable income for the recipient. (If a divorce or separation instrument that was originally finalized before 2019 is modified after December 31, 2018, it may be treated under post-2018 tax rules if the modification expressly states that it’s applying the new law.) This change can influence how parents negotiate their support arrangements.
When a support agreement or order includes both child support and spousal support, the amounts should be clearly labeled to reflect each form of support. Confusion can arise if a single payment is designated only as spousal support, especially for divorces finalized before 2019. If a single combined payment is treated as spousal support, the recipient might end up paying taxes on a portion intended for child support.
Claiming a Child as a Dependent
A child may be claimed as a dependent by only one parent each tax year. Parents who are separated or divorced may designate which parent can claim the child for tax purposes under their agreement.
If no court order or agreement states who can claim the child, they are generally claimed by the parent with whom they spend more than half the year. The IRS describes this parent as the “custodial parent.” (For a child who lives an equal amount of time with each parent, the IRS generally treats the parent with the higher adjusted gross income as the custodial parent.) However, the custodial parent can voluntarily release their right to claim the child by completing an IRS Form 8332 and giving it to the other parent, who must attach it to their return to claim the dependent exemption and any related credits.
Tax Refund Intercepts
When a parent falls behind in child support payments, government agencies have tools to enforce the support order. One method is intercepting a federal or state tax refund to cover the unpaid amount. If the paying parent owes past-due child support, the agency tasked with child support enforcement may submit a request to the appropriate tax authority. If approved, the tax authority will reduce or eliminate the paying parent’s tax refund and divert those funds toward the unpaid child support. Tax refund intercepts are typically applied only when a parent is significantly overdue, and they often come alongside other enforcement measures, such as wage garnishment or a license suspension.
