Tax Implications of Child Support

By Bob Matteucci

Mark Twain once quipped, “The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.” Albuquerque area parents who are filing their taxes for the first time post-divorce are likely to agree. 

Making sure your taxes are done properly after splitting up with your child’s other parent can be a painful process because you must ensure child support payments are correctly accounted for, and double check that the appropriate parent is claiming the child as a dependent. A slip up could get you in trouble with the IRS, or threaten your ability to get income-based benefits for your children.

Below is a brief summary of the big federal tax implications of child custody and child support payments. Attorney Bob Matteucci goes over this information with his clients, but it never hurts to have a refresher before April 15.

Discussing Taxes During Your Divorce

Divorce and taxes are two topics most people would rather avoid, but they must be discussed together if a couple that is splitting up has children. 

The biggest issue is figuring out which parent will claim the child as a dependent for tax purposes. Claiming a dependent can provide significant tax benefits — like making the filer eligible for the Child Tax Credit and the Earned Income Tax Credit. 

Only one parent may claim the child as a dependent. Most families in the Albuquerque area have the parent that has primary physical custody claim the child. However, it may be wise for the parents to agree to bring in an accountant who can determine if it is better for tax purposes for the non-custodial parent to make the claim. 

Once a decision about which parent will claim the child as a dependent is made, it should be written into the parenting plan. If a change is desired at a later date, the parenting plan will then dictate what steps the parents need to take to make that adjustment. Putting everything in writing makes things clear and court-enforceable. 

Child Support Payments Are Not Tax-Deductible 

Child support payments are not tax-deductible. This means that paying parents cannot reduce their taxable income by the amount of child support they pay.

Non-Taxability of Received Child Support

On the flip side, receiving parents should be aware that child support payments are not considered taxable income. Child support is intended to cover the child’s basic needs, and the IRS does not treat these funds as taxable income.

Documenting Payments and Expenses

Both paying and receiving parents should keep accurate records of child support payments and related expenses. Documentation can be crucial in case of audits or disputes.

Serving Families with Dignity & Compassion

If you are hoping to save your skin and avoid paying too much to Uncle Sam, it does not hurt to seek professional help the first year your file taxes post-divorce. Attorney Bob Matteucci is always happy to help past clients — or their accountants — figure out how child support payments or other divorce-related financial issues impact their taxes. Please reach out if our office can be of assistance.

About the Author
Bob Matteucci is a board certified family law specialist, with a statewide practice in the area of divorce and family law.