How does child support affect taxes? 

In many cases, it is very challenging to split parenting responsibilities and take care of taxes when you are going through a divorce. However, there are several factors that you need to understand in order to make the process a little easier. 

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First, let’s start by looking at the IRS’ definition of child support payments. The IRS defines child support payments as a way for one parent to pay another for financial support for their children. 

Normally, the person making these payments does not have to include them in their income on their tax return. This is because the payments are considered “tax neutral” – meaning that they do not have to be included in taxable income. 

If the recipient of these payments does have to report them on their tax returns, they must do so by claiming the payments as “earned income” and reporting the total amount as part of their gross income for that year. They are not eligible to claim the Earned Income Credit (EIC) for these payments, either. 

In some instances, you may also have to claim the cost of child support payments as a deduction on your tax return. This is because child support payments are considered “personal expenses” for tax purposes. 

The IRS recognizes that a parent can only deduct items that are used for personal purposes, and that includes child support. It is not deductible if the item is not needed for personal use or is a non-essential. 

This means that if you have to buy a new backpack for your child, you cannot deduct the cost of it on your tax return as a deduction because it is not necessary for personal use. In fact, it would be considered a “non-essential” expense because the backpack is not necessary for your child’s survival. 

Likewise, if you pay alimony, it is not deductible. This is because alimony was once deductible and it is no longer deductible now that child support is tax-neutral. 

The court has the power to change this formula based on factors like: 

If one of the parents’ incomes is higher than the other, the court may determine that they are responsible for more child support. This is because the higher earning parent may have more disposable income than the lower earning parent. 

Other circumstances that can affect a child support calculation are: 

Deviations to the guidelines can occur if a parent has special needs for a disabled child, has a large amount of personal assets or spends a lot of time with their child. 

Some parents can also claim a dependency exemption on the child, which can increase or decrease their net income and thereby their child support obligation. 

The IRS has an intercept stimulus program that allows state child support agencies to share information with the Treasury Department regarding parents who are behind on their child support. The federal government can then intercept a parent’s tax refund and use the money to pay any arrears that are owed to the state or to a family member.