Non-custodial parents are naturally curious to find out the answer to the question, "Can you claim child support payments on your taxes?" The truth of the matter is that the purpose of support payments made must be spelled out very carefully in an agreement between the two former spouses. Failure to do so will result in tax consequences for the recipient.
Can You Claim Child Support Payments on Your Taxes: The Answer
Child support payments made by the non-custodial parent are not deductible on that person's income tax return. The money received is not taxable in the hands of the recipient, either. For income tax purposes, this money is considered neutral.
Definition of Child Support for Income Tax Purposes
Money being paid by the non-custodial parent to the one who has physical custody of the children must be specifically designated as child support in a separation or divorce agreement to be considered in this category. If the funds are referred to simply as an amount to be paid for "family support" or "alimony," they are not treated as child support payments when it comes to income tax time.
When a separation or divorce agreement includes a clause covering support payments being made to the former spouse for support as well as to care for the children, it must be specific. Even though one payment may be made per month, the amount designated as alimony and child support must be clearly indicated. If no details about how the funds are to be allocated is included, then the entire amount being paid is considered alimony.
Alimony and Income Taxes
Alimony is treated much differently than child support for income tax purposes. It is an income tax deduction for the person who makes the payments. The recipient, on the other hand, must declare this amount as income on his or her income tax form. Women are still more likely than men to be awarded spousal support, but men collecting alimony has become more common in recent years.
Claiming a Child as a Dependent
The rules about who can claim a child as a dependent for income tax purposes become more complicated when parents are no longer living in the same home. Only one parent can claim the children as dependents on an income tax return, and the Internal Revenue Service (IRS) does cross-check Social Security Numbers to ensure that both parents are not making a claim for the same minor child.
If the parents have been separated for at least six months of the calendar year, or a divorce judgment, separation agreement or maintenance agreement has been signed, and the child received at least half of his or her support from one or both parents, the parent who had physical custody for the majority of the time can claim the child on his or her income tax form. Exceptions to this rule come into play in a situation where the custodial parent agrees to waive his or her rights to the deduction in a separation agreement or when the custodial parent signs an IRS form (Form 8332) relinquishing the right to this deduction. The completed form is then forwarded to the IRS by the non-custodial parent with his or her income tax information. If the custodial parent refuses to sign the form, then the non-custodial parent can attach a copy of the divorce decree to his or her income tax form instead.
In a situation where each parent provided equal amounts of support to their children, the issue around "Can you claim child support payments on your taxes?" becomes much more complicated. The IRS publishes a guide entitled "Divorced or Separated Individuals" that will help. Parents of minor children can also consult with an accountant or a tax expert to find out how any support payments made or received will be treated for income tax purposes. The person receiving the money will want to be sure that they do not have to include this amount as income if they are not required to do so, as they would if they were receiving alimony payments.