What qualifies as child support?

A divorce decree must state clearly that a parent must pay a certain amount in child support to be nontaxable. If the divorce decree specifies spousal support or alimony, then the payments are not child support and are taxable to the recipient. The person who receives alimony must claim it on his tax forms as income no matter what the money is used for. The person paying alimony is able to take a deduction from income for the amount paid. They can not take this deduction for child support. Technically, this means that the person paying the support pays the taxes on the money.

Considerations

Even though the child support is not taxable to the recipient or deductible to the person who pays it, a paying parent can claim a dependent child under certain circumstances. Usually, the custodial parent claims the child as a dependent. This can be changed if the custodial parent has decided to let the other parent claim the child as a dependent, or a divorce decree specifies that someone else can claim the child. This election is made with a form 8332. A parent may let the other parent claim the child as an exemption if it is more favorable to the other parent's tax situation than his own.

Significance

Not having income taxes to pay on child support money received can be a huge benefit to the parent receiving it. The size of the benefit depends on the tax bracket of the recipient. Claiming the child as a dependent has a sizable impact as well as eligibility for the child tax credit. You can deduct $3,650 from your taxable income for each child that you are eligible to claim as of 2009. It is important to have the tax details worked out before it is time to file your return.

Public Assistance and Public Collection of Support

If you pay your child's support payments to a government institution for them to deliver to your child's custodial parent, the same policies apply. This is still child support and no deduction may be taken for the payment. The custodial parent still does not have to pay taxes on the amount of support received.

Warning

The tax implications are not the only concerns when it comes to child support. Aside from the fact that many would say that you have a moral obligation to contribute to your child's support, there are legal and civil obligations as well. In many states, the authorities will revoke your driver's license if you do not pay ordered support. Professional licenses may also be suspended. The state may also assist your child's other parent in collecting support by finding where you work and obtaining a garnishment order against your wages. This means that the money will be taken directly from your paycheck.