The process of resolving the issue of child support can be challenging for all parties involved. Furthermore, once child support has been awarded, it is important for both parties to know the tax implications associated with these payments. For the parent who receives child support , child support income is tax-free for federal income tax purposes. For the party that pays child support, these payments are not tax-deductible. It should be noted that the implications differ for spousal support, which is taxable for the recipient and tax-deductible for the person who makes the payments. As a result, there is often a point of contention when characterizing support payments as either child or spousal support. Generally, to qualify as child support, the payments must be designated as such in the divorce or separation agreement.
Another issue that arises with child support is the question of who can claim the child as a dependent for tax purposes. The general rule is that in order for someone to claim a child as a dependent, a person must provide at least 50% of the child’s financial support during the tax year. An exception to this rule is when the parties have entered into an agreement. Therefore, unless there is a written agreement (i.e.,divorce decree or separation agreement), the custodial parent will get the tax exemption for the dependent child.
Douglasville Divorce and Family Law Attorney represents clients on issues related to divorce, child custody, child support, spousal support and adoptions. Call us today to schedule a free consultation.