Is Child Support Tax Deductible?
Paying child support is a tax-neutral event
Every month, or maybe even with every paycheck, you transfer money to your ex in the form of child support. It seems only reasonable that you should be able to claim a tax break for this somewhere on your tax return. So is child support tax deductible?
Unfortunately, the Internal Revenue Service says, "No way." Supporting your children, either directly or via those child support payments, is not tax deductible. You might catch a break with their medical expenses, however.
Why Is Child Support Not Tax Deductible?
Look at it this way: If you took your son or daughter to the mall for a new pair of shoes, you couldn't claim a tax deduction for the cost. It's a personal expense, and the IRS doesn't allow 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, so it's not tax deductible. It doesn't matter who actually receives the money—it still goes toward paying for the housing, clothing, and other personal support needs of your child.
Does Your Ex Have to Claim the Money as Income?
No, your ex doesn't have to claim child support as income. Your child doesn't have to claim it as income, either, any more than he would have to report his allowance to the IRS.
Child support is considered a tax-neutral event.
This is the case 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 to the parent receiving it because one IRS rule says, "Gross income means all income from whatever source derived."
But there's an important qualifier. The full rule in Internal Revenue Code (IRC) 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. The IRS has further stated that:
This rule "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."
The Old Alimony Law
The IRC is phrased it this way to make a firm distinction between child support and alimony because alimony and spousal support were tax deductible at one point in time. This section made it clear that child support was not included in the gross income of the person receiving alimony or spousal support, and that the two payments could not be lumped together or confused.
A taxpayer could only deduct amounts paid that qualified as alimony. Because child support was not considered alimony, the person paying child support could not deduct child support payments as part of any other tax deduction.
But that was then, and this is now.
No More Confusion
The Tax Cuts and Jobs Act (TCJA) eliminated the alimony tax deduction beginning with divorce agreements entered into and divorce decrees issued from Jan. 1, 2019 onward—at least until the TCJA potentially expires at the end of 2025.
The IRC originally provided for alimony to be deductible to the spouse paying it, and it was reported as income by the spouse receiving it, so a distinction was necessary between the two types of payments.
No type of family support is deductible while the TCJA remains in effect. Alimony has now also become a tax-neutral event.
Child Support on Your 2018 Tax Return
Alimony was still deductible in the 2018 tax year—the return you'd prepare in 2019—so it might be tempting to classify those child support payments you made that year as alimony or spousal maintenance instead. 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 as income any payments they deducted on previous tax returns if it turns out that the payments weren't alimony after 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 necessarily trigger the alimony recapture rule all by itself, but it might wave a flag at the IRS.
You'd be called upon to produce court documents showing that the payments were indeed alimony. And you'd have to recapture those tax deductions on future tax returns if you can't provide that documentation.
The Medical Expense Deduction Is Still Available
Noncustodial parents aren't completely left out in the cold taxwise. The IRS is willing to throw you a bit of a bone when it comes to medical expenses you pay on behalf of your children, even if it won't let you deduct the money you pay as child support.
You can claim an itemized deduction for your children's medical expenses even if they don't live with you, provided that you personally paid them to an insurance company or provider, they lived with your or your ex for at least half the year, they're related to you, and you and your ex paid for more than half their support during the tax year in question.
Unfortunately, you must itemize to claim this deduction, and that means forgoing the standard deduction for your filing status. This wouldn't make sense unless the total of all your itemized deductions exceeds the amount of the standard deduction you're entitled to claim. And you can only claim a deduction for medical expenses in excess of 10% of your adjusted gross income (AGI) as of tax year 2019.
Child Support in Arrears
Child support and taxes do interact in one way. The Treasury Department will intercept 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 custodial parent. This program is authorized by IRC 26 CFR Section 301.6402-5.
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, even going forward. It's always possible that the alimony deduction will come back in 2026 if Congress doesn't renew the TCJA.
A qualified attorney will know what to say in your decree or court order, but make sure the documents include the correct qualifying language if you're handling a breakup yourself. You might want to have a lawyer review your documents before filing them with the court.
Otherwise, you could end up losing a legitimate alimony tax deduction for the 2018 tax year or going forward after 2025 if the IRS decides that the decree or order is unclear and that the payments might actually have been child support.
Tax laws change periodically, and you should always 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.