Tax Returns and Child Support: What You Need to Know

Tax season can be a confusing time, especially when child support payments are involved. Whether you’re paying or receiving child support, understanding how it affects your tax return is crucial. In this guide, we’ll break down how child support impacts taxes, what deductions and credits may apply, and how to avoid common filing mistakes.

Does Child Support Affect Your Taxable Income?

One of the biggest misconceptions about child support is how it impacts taxable income. Here’s the truth:

If You Receive Child Support: Child support payments are not considered taxable income. You do not have to report them on your tax return, and they do not increase your tax liability.
If You Pay Child Support: Unfortunately, child support payments are not tax-deductible. Unlike alimony, which was deductible for divorces finalized before 2019, child support cannot be used as a deduction on your return.

Who Claims the Child as a Dependent?

A major tax-related question for divorced or separated parents is: Who gets to claim the child as a dependent?

1. The Custodial Parent Rule

Generally, the parent who has custody of the child for more than 50% of the year is considered the custodial parent and has the right to claim the child as a dependent.

2. Can the Non-Custodial Parent Claim the Child?

Yes, but only if the custodial parent signs IRS Form 8332, which releases their claim to the exemption. The non-custodial parent must attach this form to their tax return to legally claim the child.

Tax Credits and Child Support

Parents who qualify can take advantage of several tax credits, but eligibility often depends on who claims the child as a dependent.

1. Child Tax Credit (CTC)

Worth up to $2,000 per qualifying child under 17.
Only the parent claiming the child as a dependent can claim this child tax credit.

2. Earned Income Tax Credit (EITC)

Provides financial relief for low-to-moderate income families.
Only the custodial parent can claim the EITC if they meet income requirements.

3. Child and Dependent Care Credit

If you paid for childcare while working or looking for work, you may qualify for this credit.
Only the custodial parent can claim this credit.

What Happens If Both Parents Claim the Same Child?

If both parents attempt to claim the child as a dependent:

The IRS will reject one of the returns (typically the second one filed).
If both parents insist they are entitled to the deduction, the IRS uses the tiebreaker rule, favoring the custodial parent or, in some cases, the parent with the higher adjusted gross income (AGI).

Can Back Child Support Affect Your Tax Refund?

Yes! If you owe past-due child support, your tax refund may be intercepted by the Treasury Offset Program (TOP) to cover unpaid amounts. Here’s how it works:

The IRS will notify you if your refund is being reduced due to past-due child support.
You can contact the Office of Child Support Enforcement (OCSE) if you believe there is an error.
If you file a joint return, your spouse may be able to file Injured Spouse Relief (Form 8379) to protect their portion of the refund.

Tips to Avoid When Tax Filing Issues

1. Communicate with the Other Parent

If possible, agree in advance on who will claim the child each year. Some parents alternate years to maximize tax benefits.

2. File Early

Since only one parent can claim the child, filing early reduces the risk of rejection due to a duplicate claim.

3. Check Your Child Support Status

If you owe back child support, be prepared for a possible refund offset. Paying overdue amounts before tax season can prevent surprises.

Child support and taxes can be complicated, but understanding the rules helps you avoid costly mistakes. Whether you’re receiving or paying child support, knowing how it impacts your tax return ensures you file correctly and maximize available tax benefits. Need professional tax assistance? Cowdery Tax and Business Solutions is here to help—contact us today to ensure a smooth tax season!

This information is not intended as legal or tax advice. Cowdery Tax and its representatives does not offer legal or tax advice. We offer services for business bookkeeping, payroll, tax payments, and personal tax filings. We share information that is publicly available. Tax laws may change with or without notice that may alter or change the information contained in this publication.