When two parents decide to separate or get divorced various implications and subject matters must be considered. In addition to determining which spouse will receive which assets, child custody must be discussed. A custodial parent is one who spends half of the year or longer with the child. Because raising a child is expensive and they do not dedicate as much time and resources as the other parent, the noncustodial parent may be required to contribute to the growth of their child via child support payments. Some may wonder if child support is an expense that can be deducted from your taxes, but it is not taxable in New Jersey. For more information speak with a Union County child support attorney.
What is a Deduction?
In terms of taxes, a deduction is an amount that is subtracted from the total taxable income a person makes in a year. Deductions are typically certain expenses that are paid to help produce additional income. By reducing the amount of taxable income a person has made over the year, they are reducing the amount of taxes they have to pay.
Deductions can come in the form of business expenses, charitable donations, alimony, state or local taxes, retirement contributions, and more.
Is Child Support Taxable?
Child support is not taxable in any state across the U.S. A noncustodial parent who sends monthly child support payments cannot deduct those amounts from their annual income in an effort to reduce the amount of money they are taxed on. Child support payments are considered tax-neutral because they are paid with the sole intent of financially supporting the child.
Is Child Support Considered Income?
A custodial parent who is the recipient of child support payments does not have to claim these payments as income and they do not have to pay taxes on the child support money they receive. If child support payments were taxable it would decrease the amount of money that a custodial parent has to spend on the child. Because the payments are not meant to financially benefit the receiving parent they are not considered income.
Are There Any Tax Benefits For Parents?
One tax implication of having a child is that they can be claimed on financial documents as a dependent. When the IRS sees that a person has one or more people depending on them for financial support their taxes are lessened.
Although it is advantageous, this can result in controversy for divorced or separated parents. A child can only be claimed as a dependent on one parent’s records. Generally, the child will default to the custodial parent’s dependent because of the amount of time they spend with them and the financial resources that are used in raising the child.
