Those W-2s are rolling in, which means it's time to start thinking about filing your taxes. For those paying child support, that means an added layer of complexity.
Sure, April 15 is still a few months away, but waiting until the last minute isn't going to help you maximize your tax benefit.
You know what will? Understanding how child support will affect your tax burden. It's not exactly a tax deduction, but it's nothing to sneeze at either.
Child Support Is Tax-Free for You and Your Child
There is no federal income tax on child support payments made under a court order or divorce decree. That means you don't have to pay income tax on the money, and your child (who is the recipient) doesn't have to pay it either.
Most of us have income tax automatically deducted from our paychecks, so in effect you could get a little money back from the government. But it's not a deduction.
Tax deductions allow you to subtract from your total income, and you're taxed on this newly decreased amount. Here, the government isn't decreasing your total income; it's just not taxing you on the amount you paid in child support.
Alimony Is Tax Deductible
Of course, it's only tax-free if your divorce decree specifies separate money for child support and alimony. If it's all lumped together in one amount, then it's all considered alimony.
That may be good for you, but it's not so good for your child. Alimony is tax-deductible for the person paying, but the recipient has to declare it as income and pay taxes.
If the money was paid as child support, you child would get more of it since no taxes would be taken out.
You can fix this issue by rewriting your divorce decree to separate child support from total alimony. It won't change this year's taxes, but it will be a benefit to your child going forward.
Know How to File Your Taxes, or Else
Filing taxes can be complicated and the penalties for doing it wrong are steep. Free online resources, like what you can find at FindLaw, are a good first step to educate yourself.
If the process still looks intimidating, you don't have to go it alone. Find a professional to help you through the process so you can file with confidence.
- Child Support and Taxes: Non-Custodial Parent FAQs (FindLaw)
- Take your questions on child support and alimony to our experts (FindLaw Answers)
- How Child Support Calculations Work (FindLaw's Law and Daily Life)
- The FindLaw Guide to Getting Child Support Payments (FindLaw - Free Download)