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Child support – either paying or receiving it – is part of most child custody cases. While the changes to your normal daily budget are easy to understand, many people wonder about the tax implications of child support.
Will I be taxed on child support that I receive? What about child support that I pay? We can help answer those questions:
For the child support payor
If you are ordered to pay child support as part of your child custody case, the child support you pay is not taxed as income. It is taken out of your check before any state or federal taxes are calculated, much like contributions to a 401K or pension.
For example, if you make $2,000 per paycheck and pay $200 in child support, you will only be taxed on the remaining $1,800, not the full $2,000 you were paid.
The same is true for your tax returns at the end of the year. You will only be taxed on the amount of income you had after child support was paid. So, if you made $150,000 last year and paid $10,000 in child support, your tax obligations will be calculated based on $140,000.
For the child support receiver
Child support is also not considered taxable income if you are the one receiving child support.
If you made $50,000 last year at your job, and received $10,000 in child support, you will only be taxed on the $50,000 of income.
This is especially helpful in single-income households, as many worry that child support received will push them over the threshold for tax benefits such as the Earned Income Tax Credit.
Child support & tax exemptions
Child support, either paid or received, can have an impact on which parent receives the child tax exemption on annual tax returns.
For parents who lived apart for the 6 months prior to filing tax returns, or parents who have a written divorce decree, separation agreement, or maintenance agreement and whose child received more than half his annual support from one or both parents, the exemption automatically goes to the parent who had the majority of the parenting time during the year.
However, if the parents’ divorce decree or parenting plan states something different, such as the non-custodial parent gets the exemption or that the parents rotate the exemption, the IRS honors these agreements.
This exemption can have a big impact on any taxes you might owe or overpayments you might receive, so be sure to discuss your options with your attorney as well as an accountant during your child custody case.
Experienced Child Custody & Child Support Lawyer in Washington, D.C.
At Lopez Law Firm, we focus solely on family law cases in Washington, D.C., because we believe in providing the best representation possible to our clients. Each child custody and child support case is different.
We sit down with you and get to the heart of your case, working tirelessly until we get the best solution for you and your family. Call today for your consultation!