Is Child Support Tax Deductible?
Child support is considered a tax-neutral event
Every month, or maybe even with every paycheck, you transfer a set amount of money to your ex in the form of child support. It seems only reasonable that you should be able to claim this expense as a deduction somewhere on your tax return—it can add up, after all. And alimony is tax deductible, so shouldn't child support be deductible as well? Unfortunately, the Internal Revenue Service says, "No way."
Look at it this way: If you took your son or daughter to the mall this afternoon for a new pair of shoes, you couldn't claim a tax deduction for the cost. It's a personal expense, and the IRS does not offer tax deductions for personal expenses. When you pay child support, you effectively give that "shoe money" to your ex rather than to the shoe store. This doesn't make it tax deductible. It doesn't matter who actually receives the money—it still goes toward paying for the housing, clothing and other personal needs of your child.
So no, you can't deduct those payments on your tax return, and your ex doesn't have to claim the money as income either. Nor does your child have to claim it, any more than he would have to report his allowance to the IRS. Child support is considered a tax-neutral event. As the IRS puts it in Publication 504, "Child support payments are not deductible by the payer and are not taxable to the payee." Furthermore, "When you calculate your gross income to see if you are required to file a tax return, do not include child support payments received."
That's the rule even if you cannot claim your child as a dependent.
Interpreting Tax Law
Two tax laws function together to determine the tax treatment of child support. On one hand, it's reasonable to expect that child support might be taxable income because one rule says, "Gross income means all income from whatever source derived." But there's an important qualifier. The full rule in Internal Revenue Code section 61(a) reads like this: " Except as otherwise provided in this subtitle, gross income means all income from whatever source derived."
And that brings us to the second rule at play here—it's that "except as otherwise provided" caveat. Elsewhere in subtitle A of the Internal Revenue Code, we find Section 71, which deals with alimony and separate maintenance payments. And this rule says, "Gross income includes amounts received as alimony or separate maintenance payments."
It goes on to provide an exception for child support: "Subsection (a) shall not apply to that part of any payment which the terms of the divorce or separation instrument fix (in terms of an amount of money or a part of the payment) as a sum which is payable for the support of children of the paying spouse." In other words, child support is not included in the gross income of the person receiving the alimony or spousal support.
Because a taxpayer can only deduct amounts that qualify as alimony, and because child support is not considered alimony, the person paying child support cannot deduct those child support payments as alimony or as part of any other tax deduction.
What makes a payment child support and not alimony?
It's naturally tempting to classify those child support payments you've been making as alimony or spousal maintenance at tax time. Don't do it—the IRS anticipates this and is way ahead of you.
The tax code has a recapture rule in place that requires taxpayers to report income they deducted on previous returns as alimony if it turns out that the payments weren't alimony at all. The rule includes certain signals, such as "alimony payments" that coincidentally end at the same time your youngest child flies the nest and no longer requires your financial support. Of course, this is plausible—maybe you were paying alimony so your ex could be a stay-at-home mom and alimony ended when there was no longer anyone she needed to stay home for.
The event wouldn't trigger the alimony recapture rule by itself, but it might wave a flag at the IRS and you'd be called upon to produce court documents showing that the payments were indeed alimony. And if you cannot, you'd have to recapture those tax deductions on future tax returns.
It's always wise to make sure your divorce decree or child support order is crystal clear in identifying the nature of any payments you're making to your ex. A qualified attorney will be aware of this, but if you're handling a breakup yourself, make sure the documents include the correct qualifying language even if you have to have a lawyer review them before filing them with the court. Otherwise, you could end up losing a legitimate alimony tax deduction if the IRS decides the decree or order is unclear and the payments might actually have been child support.
Child Support in Arrears
Child support and taxes do interact in one way. The Treasury Department will redirect federal tax refunds from people who are behind on their child support payments, sending the money instead to the custodial parent who was entitled to receive that support. Under the Treasury Offset Program, the government will pay out the tax refund money to the parent's state child support agency, and the agency will, in turn, make sure the funds get to the child. This program is authorized by Internal Revenue Code section 6402(c).
NOTE: Tax laws change periodically, and you should consult with a tax professional for the most up-to-date advice. The information contained in this article is not intended as tax advice and is not a substitute for tax advice.