If you are thinking about a divorce – or if you are expecting that your partner is going to divorce you – understand that a divorce will impact every area of your life, including your taxes.
The Census Bureau tells us that more than four million parents in the United States received payments for child support in the year 2016.
You are about to learn how the Internal Revenue Service handles and categorizes the child support payments you send to or receive from your child’s other parent.
Child support can be a quite volatile topic in a divorce proceeding. Every child in this state – whether that child is born to married parents, born to unmarried parents, or adopted – has the absolute legal right to parental financial support.
PRECISELY WHAT IS CHILD SUPPORT? IS IT A PUNISHMENT?
An order to pay child support is not a punishment or a penalty handed down by the court. It is simply the formalization of an obligation that a parent has already assumed.
To receive child support payments, a parent must request an order from the court compelling the child’s other parent to make child support payments.
If a child support dispute arises between you and your child’s other parent, whether that dispute emerges during or after the divorce, you are going to need the advice and representation of an experienced Long Beach divorce lawyer.
FOR HOW LONG IS CHILD SUPPORT PAID IN CALIFORNIA?
When divorcing spouses are the parents of one or more minor children, child support arrangements must be made during the divorce proceeding.
After most California divorces, with only several narrow exceptions, child support must be paid until a child turns age 18.
Child support may continue after the child’s 18th birthday if both parents agree, or until age 19 if the child is still attending high school. When a child is physically or mentally disabled, child support payments may continue indefinitely.
The amount of child support that parents pay and receive in this state is based primarily on the California Child Support Guideline and determined primarily by the incomes of the two parents.
It is imperative for parents to understand what is considered “income” and what is considered “child support” by the Internal Revenue Service.
FREQUENTLY ASKED QUESTIONS ABOUT CHILD SUPPORT AND TAXES
Below are some of the questions that parents ask most frequently about child support and taxes.
The answers provided here are general answers because everyone’s situation will be different, but a divorce attorney can provide the more personalized answers you may need.
Q: Are payments for child support classified as taxable income?
A: No. Child support payments are not taxable income. If you receive child support, when you add up your gross income, do not add in the child support payments.
Q: For the purposes of the Earned Income Credit, is child support classified as income?
A: No. Child support is not considered income for the purposes of the Earned Income Credit.
IS CHILD SUPPORT DEDUCTIBLE? IS IT TAXABLE INCOME?
Q: If you make child support payments, are you allowed to deduct the payment amount or to claim the child as an exemption?
A: Payments for child support are not deductible by the paying parent and they are not classified as taxable income for the receiving parent.
The parent who provided more than half of the child’s support for the tax year is usually allowed to claim the exemption for the child, provided that the other exemption tests are met.
However, the exemption may be transferred to the noncustodial parent if the custodial parent agrees, signs an IRS Form 8332, and the noncustodial parent includes that form with his or her annual tax return.
IF THE PARENTS NEVER MARRIED, WHO HEADS THE HOUSEHOLD?
Q: If two unmarried parents are living together and providing equal support for their child, can they both claim head of household status?
A: Only the person who paid more than half of a child’s financial support for the year qualifies for the head of household status.
If both parents believe that they paid precisely the same amount of financial support for their child, it may get legally complicated.
Help for parents in this circumstance is offered in IRS Publication 504, or you may want to consult your divorce attorney or your financial adviser.
WHY IS THE WORDING IN A DIVORCE AGREEMENT SO IMPORTANT?
Q: If you are a parent in California and you are divorcing, what should be included in the divorce agreement?
A. You must make certain that child support is clearly defined as child support in the text of your divorce agreement. If the agreement combines alimony with child support and uses a term like “family support,” no percentage of any payment will be classified as child support by the IRS.
Protect yourself. Ask your divorce lawyer to make sure that your divorce agreement clearly specifies what money is intended for child support payments and what money is intended for spousal support or for other purposes.
Q: If the Internal Revenue Service has questions for you regarding child support or the dependent child exemption, where can you turn for help?
A: Speak to an experienced Long Beach divorce lawyer who can address your concerns regarding child support and any other topic that may arise in a divorce proceeding.
If the IRS has questions about child support, contact your attorney for the advice you’ll need.
WHAT SHOULD YOU LOOK FOR IN A DIVORCE ATTORNEY?
Whether your financial situation is modest or affluent, it is imperative to be advised and represented by a trustworthy divorce attorney who fully understands how your taxes will be affected by a California divorce.
Most family lawyers answer these types of tax-and-divorce questions routinely, and your attorney will be happy to address your concerns.
Divorces and taxes can both be quite intimidating. Together, they can present anyone with almost overwhelming personal challenges.
And if you do not get the details right, you could end up paying some substantial penalties to the Internal Revenue Service.
If you expect a dispute over child support, if you need the court to issue a child support order, or if you are not receiving the child support payments that have been ordered by the court, get the legal help you need, and do it immediately.
Because nothing is more important than your children, their future, and your relationship together.