Free Divorce Information

While spousal support is tax-deductible (it's tax-deductible for the payor and taxable for the payee), child support is tax-free. This means that neither the child nor the paying parent have to pay taxes on it. However, there can be tax consequences for the paying parent depending on how child support is characterized in the divorce settlement agreement.

What can be considered as child support?
For taxation purposes, any support that is intended to go to child support should be designated as child support. Lumping your child support together with other monetary support will not be considered as child support when it comes to tax purposes. Say for example you agreed in the divorce settlement to pay for the upkeep of the family home as well as child support. If you do not make it clear in the settlement agreement that you will pay separately for child support and lump everything together as "alimony" or "family support", this won't be considered tax free.

For the recepient of the support, this could have an adverse effect tax-wise. This means that since alimony and other types of financial support is taxable (regardless of what the money is used for), you'll be paying tax for child support as well because it was not characterized as child support during the settlement.

Who Can Claim a Child as a Dependent for Tax Purposes?
After a divorce has been finalized, only one parent can claim a child as a dependent. The IRS actively comes after divorced parents who attempt to both claim their child or children as dependents.

Generally, the parent who provides at least 50% of the support for the child during the tax year gets to claim the child as a dependent. This is for people who live together or are still married. If people are divorced, living apart, or have a maintenance or separation agreement, a special rule applies.

In such cases, if the child is in the custody of one parent for the tax year and received more than half of the support from one or both parents, the custodial parent gets to claim the child as a dependent. The non-custodial parent may claim the child as a dependent if:

• The divorce decree or maintenance/separation agreements show that the custodial parent waives the right to claim the child as a dependent
• The custodial parent completes and signs IRS Form 8332 which effectively relinquishes the right to claim the child dependent exemption.
• The non-custodial parent attaches the declaration of the custodial parent to his/her tax form.

Depending on the agreement in the divorce settlement, a custodial parent can waive the right to claim the child as a dependent for a number or years or for good. It's important to note that if a custodial parent relinquishes the right to claim the child as a dependent, he/she also cannot be eligible for child tax credit anymore.