Any child support payments you’ve received won’t be counted as taxable income. And if you’re the one making the child support payments, the income you used to do so won’t be tax-deductible. But there are ways to save on taxes in the process. We take a closer look in this guide on taxability and child support.
A financial advisor can help you optimize your financial plan to mitigate your tax liability.
Is Child Support Taxable?
Generally speaking, child support isn’t taxable, according to the IRS. The government considers child support payments to be “tax neutral” personal expenses, so this money won’t be subject to income tax. This means that you won’t have to include child support payments received on your tax return.
For instance, if you’re on the receiving end of child support payments, and you normally get roughly $2,600 per year, you won’t have to factor in the $2,600 when determining your taxable income for the year.
Child Support: Is It Tax-Deductible?
Under IRS law, personal expenses aren’t tax-deductible. Therefore, child support isn’t tax-deductible either. This doesn’t have tax implications for the recipient of the child support, but it affects the payer. Specifically, the payer is taxed for the money used to make the child support payments.
However, this doesn’t mean that child support is completely devoid of tax benefits. You may qualify for tax credits such as the Child and Dependent Care Tax Credit and the Child Tax Credit, but only if you have the Head of Household filing status. You can attain Head of Household filing status by claiming your child as a dependent. If you’re the payer, you can claim a child as a dependent if they lived with you for more than half of the year, according to the IRS.
Bottom Line
Child support income isn’t taxable for the recipient, and the payments aren’t deductible for the payer. If you’re the recipient, you won’t have to account for any child support income while calculating your gross income and filing your tax return. This is mainly because child support payments are considered personal expenses. Payers of child support may receive tax benefits, though, if they claim their children as dependents.
Tax Planning Tips for Those with Dependents
- If you are divorced, only one parent can claim a child as a dependent on his or her tax return. Typically, the parent who files the tax return first gets the right to claim the child as a dependent. And this comes with benefits such as the Head of Household filing status, tax credits and other financial perks.
- A financial advisor can help you answer questions related to tax planning, investing, retirement and more. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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