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Paying child support and tax implications

On Behalf of | Feb 24, 2016 | Child Support

Not all of the people in California and throughout the country who are owed child support are paid the full amount. According to the U.S. Census Bureau, around $10.4 billion of the $32.9 billion owed in 2013 went unpaid.

Parents who are divorcing may wonder how child support and custody affects taxes. For people who receive child support, it is not considered taxable income. However, people who pay child support must pay taxes on the amount just as they must on the rest of their income.

The custodial parent is the one who has a right to claim the child as a dependent on taxes. This means that even if the other parent provides the bulk of financial support, that parent cannot claim the child unless the custodial parent agrees to it. The custodial parent must sign an agreement that they do not intend to claim the child as a dependent. Both parents must also sign an IRS form, which is then filed with the taxes of the noncustodial parent.

Some parents share joint custody, and in that case, they might agree to take turns claiming the child in alternating years. This is best covered in the parenting agreement that is put together during the divorce.

Child support can be an area of significant concern for both custodial and noncustodial parents. Both parents may be worried about finances and how they are going to support the child. In California, child support is calculated using a formula. A child support amount might be agreed upon, but shortly after, the parent paying support might become ill and be unable to work for a period of time. That parent is still required to pay the same amount of child support unless they go to court and are able to get a modification.