Is Child Support Tax Deductible?

For parents who pay child support to their ex-boyfriends every month, or maybe even with every paycheck, you might wonder if those payments are tax deductible. Unfortunately for these parents, the answer from the Internal Revenue Service (IRS) is "No."

Keeping your children, whether they live with you or you pay child support, is considered a personal expense. It is not tax deductible. However, non-custodial parenting can come with one or two possible tax breaks.Here's what you need to know about how child support can affect your taxes.

Why is child support not deductible?

If you take your child to the mall to buy a new pair of shoes, this is not tax deductible. The IRS treats child support payments the same way. In reality, the money will be used to buy shoes (or something similar), regardless of whether you take your son to the mall or her ex.

Whether the payments are for your child's housing, clothing, and other personal support needs, everything is not deductible.

Does your ex have to claim the money as income?

Your ex does not need to claim child support as income. Her son does not need to claim this as income, just as she would not have to report her allowance to the IRS.

The IRS unequivocally states that child support payments are never deductible to the payer and are never taxed to the beneficiary.

Custodial parents should not include child support payments received in their gross income for tax purposes. This is the case even if they claim a child as a dependent.

Child support is considered a tax-free event.

Interpretation of tax legislation

Section 61 (a) of the Internal Revenue Code (IRC) says that gross income covers all income from any derived source, except "otherwise." The IRS clarified in a 2016 statement that "otherwise" specifically applies to payments related to "child support."

How Child Support Payments Affect Taxes

IRC makes a strong distinction between child support and child support. This is because child support and child support, unlike child support, used to be tax deductible. The person who pays child support can deduct these payments, and the person who receives them must include them on their gross receipts for tax purposes.

Alimony under the CCJA

The Tax Reduction and Employment Act (TCJA) eliminated the child support tax deduction from entered divorce agreements and divorce decrees issued from January 1, 2019 onwards.

Unlike many aspects of personal taxes affected by the CCJA, this provision does not return to normal by the end of 2025; it will definitely disappear unless a future Congress decides to pass more tax reforms to address it.

Alimony on your 2018 tax return

Child support was still deductible in tax year 2018, the return you would have prepared in 2019.If you forgot to deduct child support payments for that year, you can file a corrected return to correct this (as long as you do so within the statute of limitations ).

However, it is a bad idea to try to reclassify child support payments as child support to claim a deduction. The tax code has a recall rule that includes certain signs that raise red flags for the IRS. If you go back and try to reclassify the payments, it could generate red flags.

You may be required to present court documents showing that the payments were actually child support, and you will have to recover these tax deductions on future tax returns if you are unable to provide this documentation.

The child tax credit

The Child Tax Credit is also alive and well. It is worth up to $ 3,600 per eligible child in fiscal 2021 for those earning up to $ 150,000 and, in accordance with the provisions of the American Rescue Plan enacted into law on March 11, 2021, is fully refundable.8

Unlike the Earned Income Tax Credit, non-custodial parents can claim this credit if they had the right to claim their children or children as dependents because the custodial parent granted them this right by completing and signing IRS Form 8332. Special eligibility rules apply to children of divorced, separated, or never married parents.

 

We hope you enjoy watching this video about Is Child Support Tax Deductible?

Source: ChildSupportHub

 

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