When preparing to file your taxes, certain situations can complicate your returns. Multiple employers, a move during the year, having an additional child, or going through a divorce can impact taxes. However, child support payments aren't tax-deductible. So, you can't reduce your taxable income through child support.
Child support payments are personal expenses, not tax-deductible expenses.
Essentially, all payments made to another parent in support of a child are considered a personal expense by the IRS. Whether you spent $100 on clothing for your child by taking them to the store yourself or by sending $100 to the other parent, you’re simply supporting your own child’s life and well-being, which isn’t tax-deductible.
Think of child support as money changing hands in order to financially support the child. That money can be used to help pay the rent or mortgage on the child’s primary residence, purchase food, pay medical expenses, and any other required costs associated with raising the child.
Another way to think of child support is to recognize that the money has already been taxed before going to the recipient. The non-custodial parent pays taxes on their income before making child support payments, so any tax implications on either end of the transaction wouldn't make sense.
Just as the person paying child support can't deduct that money from their taxes, the receiver of the child support check doesn't report that as taxable income. Unlike wages earned from work or passive income earned from investments, child support isn't reportable income for the receiver.
Therefore, if you’re the recipient of child support payments, remember not to include those amounts in your annual income. Keeping child support tax neutral on both sides helps ensure that child support only goes to raise the child. Otherwise, it could unintentionally increase one parent’s taxable income or offer a tax break to the payor.
Other tax provisions like the Enhanced Child Tax Credit help families.
There are other provisions in the IRS tax code that assist with family expenses. For example, parents can take a tax credit each year for every dependent child, which was distributed in the form of six monthly advance child tax credits last year. However, this only applies if you’re the primary custodial parent.
There’s also a standard tax deduction for everyone available for those who don’t itemize their deductions.
Meanwhile, IRS Form 8332 is an option if the custodial parent is willing to sign over the right to the other parent to claim the child as a dependent. Even when a child lives the majority of the year with one parent, that parent can offer the non-custodial parent the right to claim the child on their taxes, gaining the dependent exemption and the child tax credit.