Child Support and Taxes: Non-Custodial Parent FAQs
Child custody arrangements and income are significant factors in determining child support award amounts and income tax return obligations. Since custody, income, and child support are closely connected, child support responsibilities can affect a non-custodial parent's tax returns.
This article answers the following frequently asked questions about how child support payments can impact a non-custodial parent's Internal Revenue Service (IRS) tax filings.
- How does income affect child support orders?
- Does the IRS consider child support to be income?
- Does Form 8332 affect the Child Tax Credit?
- Who can claim a child on taxes with 50/50 custody?
- If the noncustodial parent gets permission from the custodial parent to claim a child on their tax return, is the noncustodial parent eligible for the Earned Income Credit?
- Does the IRS consider spousal support to be income?
- Can the court intercept your state and federal tax refunds to cover past due child support or missed child support payments?
- Get legal advice about child support and taxes questions
The judge follows specific state child support guidelines when they set a child support order. The state bases the guidelines on the parents' income. A child support affidavit provides information about a parent's income.
"Income" means more than wages and salary. For example, the income of a new spouse is "income" for child support purposes. This is how the judge determines the amount of child support. Child support may be mostly based on parental income, but it can be hard to collect from parents who ignore the order. Sometimes the custodial parent decides to get help via public assistance.
There is a relationship between child support and taxes. However, the IRS doesn't consider child support payments as income. When you calculate your gross income, do not include the support payments that you receive. Because it is not taxable income. Child support payments are not tax deductible either. Child support is “tax neutral."
Yes. Certain individuals may claim a tax credit for their dependent children. Only the parent using the dependency tax exemption can claim the Child Tax Credit. You must provide the IRS with supporting documents and information, such as the dependent's social security number and birth certificate.
A custodial parent may use Form 8332 to release the exemption to the non-custodial parent. In that case, the non-custodial parent would qualify for the dependency exemption and therefore the Child Tax Credit.
If there is 50/50 split custody of the child, you may share custody, but you can't share the child for tax benefits. You can't divide up your child's tax benefits on two different tax returns. If you claim your child on your tax return and your co-parent claims your child on their return, the IRS has to figure out which claim takes priority.
The IRS states that "only one person may be eligible to claim the qualifying child as a dependent." The custodial parent claims the child as a qualifying dependent in most cases. There is a residency test in order for a taxpayer to claim a child as a qualifying dependent. The test requires that the minor child live with the parent for a certain amount of time. It is for more than half of the year. The custodial parent is the one who has primary physical custody during the year.
If you share custody 50/50, the custodial parent is the parent with physical custody of the child for more days and nights during the year. But what if the time is exactly equal? If this occurs, then the parent with the higher adjusted gross income is the custodial parent. The IRS gives that parent priority to claim the child. This means that the parent with the IRS priority right can change every year. Due to this situation, some parents alternate years. For example, you could claim the child for even years. Your co-parent could claim the child for odd years.
If the Noncustodial Parent Gets Permission From the Custodial Parent To Claim a Child on Their Tax Return, Is the Noncustodial Parent Eligible for the Earned Income Credit?
Probably not. The Earned Income Credit (EIC) is a tax credit for people who work and earn income below a certain amount. There are particular rules a person must meet to be eligible for an EIC. Some parents may be able to receive an EIC if they have a qualifying child. Generally, non-custodial parents cannot claim the EIC on the basis of their children because the children do not live with that parent and consequently do not meet the residency test. If the custodial parent meets other requirements, he or she may be able to claim the EIC.
Sometimes a parent receives spousal support along with child support in a divorce. If you receive spousal support, do not report your payments as income on federal income taxes. The IRS does not consider spousal income/alimony as income. It used to. The law changed in 2019. However, check with your state for information on state tax returns. Some states consider this income for tax purposes.
Can the Court Intercept Your State and Federal Tax Refunds To Cover Past Due Child Support or Missed Child Support Payments?
Yes. Federal law allows the state to take money from you for child support debt. This includes intercepting your state and federal tax refunds. A tax intercept (or tax refund offset) is a payment that is intercepted by the child support services agency to pay for current child support. Or it is used to pay for past due child support (arrears) if you owe.
When the family law judge makes a court order for support, the parents must follow the order. If you don't meet your child support obligation, the court finds you are in "contempt of court." The court can add up your missed payments. And classify them as "child support arrears."
When this occurs, the custodial parent can attempt to recover the missed payments. They can get help from the state agency's child support programs or state disbursement programs. The child support enforcement services section at the child support office can assist with this. You can give the caseworker your case information. If the court gets involved with your child support case, the judge might order you to go to a court hearing. At the hearing, the paying parent should explain why they haven't kept up with their payments.
In addition to tax interceptions, the court may use other enforcement methods, including:
- Income withholding/withholding order
- Loss of driver's license
- Professional license suspension
- Seizure of property
- Taking money from your bank account
Whenever taxes and child support mix, it is usually a complicated situation — whether you're a custodial or non-custodial parent. If there's a large sum of money involved, you're almost certainly better off speaking with a professional. If you need help knowing where to begin or are looking to hire legal counsel, find a family law attorney near you with experience in such matters. They can give you additional information about these issues.
Can I Solve This on My Own or Do I Need an Attorney?
- Some states allow you to set up child support with forms and court processes
- You may need legal help to set up or modify child support arrangements
- If there is conflict, an attorney can advise if the other parent’s actions are legal
Get tailored advice about paying or receiving child support. Many attorneys offer free consultations.
Don't Forget About Estate Planning
Once new child support arrangements are in place, it’s an ideal time to create or change your estate planning forms. Take the time to add new beneficiaries to your will and name a guardian for any minor children. Consider creating a financial power of attorney so your agent can pay bills and make sure your children are provided for. A health care directive explains your health care decisions and takes the decision-making burden off your children when they become adults.