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Divorced parents make child support payments to their ex-spouses each month. Child support payments are made allowing a child to have a certain standard of living. The standard of living should, in theory, be the same as what the child would have expected had the parents not divorced.
Parents that pay child support each month tend to have a lot of questions about their payments. One of the most pressing questions for many parents is whether or not child support payments are tax deductible.
Paying child support and taking care of your child financially is an obligation. Therefore, according to the Internal Revenue Service, child support payments are not tax deductible. The IRS does not see child support as a charity, rather it is a financial obligation in the same way taking care of a child is if you live in the same household.
Child support is seen by the IRS as a personal expense. It is viewed in the same manner as buying coffee, commuting to work, or purchasing a meal. Child support is simply not tax deductible. The good news for non-custodial parents who pay monthly child support payments is that there may be some exceptions to the IRS’s rules of child support being non-tax deductible.
What is child support and is it tax deductible?
It is first important to define what child support truly is. It is a court ordered monthly payment from one parent (the non-custodial in most cases) to the other parent (the custodial parent). Parents have a legal financial obligation to support their children. Children have the right to receive child support to help with daily expenses. Many non-custodial parents will see child support payments as something that benefits the custodial parent. However, the money paid in support is not for the custodial parent, it is for the child for housing, clothing, and food.
Why isn’t child support tax deductible?
Child support payments are meant to cover the shelter, food, and clothing a child needs. The money is used to cover an individual’s basic necessities. Therefore, child support is non-tax deductible. In the same way you cannot write off buying your child a new pair of jeans, you are unable to deduct payments to a custodial parent that is meant to cover those same necessities.
In theory, the money you pay in child support goes to your ex-spouse but is then simply used to pay for the child’s maintenance. The ex-spouse is simply a conduit that uses the support payment to purchase items for the child. Many states use the Bank of America prepaid Child Support card to monitor payments and their uses. Similarly, making child support tax deductible would make the whole system more unfair and open to greater misuse by those looking to reduce their commitments by paying less child support legally.
Can your ex-spouse claim child support payments as income?
Your ex-spouse does not have to claim the child support payment as income earned. The child the payments cover does not have to claim the money as income earned either. The IRS specifically outlines that child support payments are not earned income nor are they tax deductible. Custodial parents are not allowed to include child support payments as part of their gross income.
Tax deduction on child medical expenses
While child support payments are not tax deductible, a non-custodial parent may be able to deduct certain medical expenses. The IRS offers non-custodial parents a tax break when it comes to medical expenses that are paid on their behalf for the child.
Non-custodial parents can claim an itemized deduction for a child’s medical expenses even if the child does not live with the parent. However, the non-custodial parent must have paid the insurance or healthcare provider. The child must also:
You must itemize to receive any type of tax deduction. You can only claim a tax deduction on medical expenses that are in excess of 7.5% of your adjusted gross income for the tax year.
Can you receive a tax credit on child support payments?
A Child Tax Credit does exist and can help non-custodial parents save some money. The current Child Tax Credit is worth $2,000 for a qualifying child. Up to $1,400 of the Child Tax Credit is refundable. Non-custodial parents can claim the credit if they were able to claim their child as a dependent due to the custodial parent completing and signing IRS Form 8332.
Understanding a child support order
A child support order can be complicated. It is important to have the order as clear as possible. You should know how much each payment made to your ex-spouse is from day one of making child support payments. A divorce attorney can help you understand a child support order. If you are handling the divorce on your own, you need to ensure the child support order has the correct language in it.
Intercepting tax refunds for child support
While child support payments are not tax deductible, you can have your income tax refund intercepted for not making child support payments. The Treasury Department will take your federal tax refund as punishment for not making payments to your ex-spouse. The refund is then sent to the custodial parent to cover the missed child support payments. The Treasury Department intercepts the tax refund and sends it to the custodial parent’s state child support agency. The money is then dispersed to the custodial parent.
Making child support payments
Parents having difficulty making their monthly child support payments due to a lack of finances can petition the court to modify the original child support order. Just because you ask for a modification, it doesn’t mean the courts will allow it. In fact, a modification could go in favor of the other parent. You will need to show that a significant change has occurred in your finances. You can also show that a significant change occurred in your ex-spouse's financial affairs.
A modification to a child support order only applies to future payments made. Modifications are not retroactive; therefore, you cannot get a tax refund on payments previously made.