The central theses
- Child support does not change either parent's taxes. Period. It's like a tax free event.
- Claiming a child for tax purposes MAY have some tax benefits, and parents can choose who can claim the child
- Registering a child can allow you to deduct medical expenses, claim head of household status, and many valuable tax credits.
Why is child support important to women?
According to the Census Bureau, 80% of custodial parents are women. If this is you, you know how important child support is to your financial situation. And as a result, negotiations often take place over who is entitled to the child (and receives the tax benefits).
As a financial advisor to women and single moms, this makes me (very) nervous and a little irritated. About 75% of single mothers do not receive full child support. But since you are the guardian parent, you still have to pay the bills. The tax benefits associated with filing for a child can help reduce your tax burden, which means more money for that. This especially applies to the low-income spouse.
In my opinion, tax breaks should always go to the football-washing dad and it's very important not to give up.
Can child benefit be deducted?
No. Child support payments cannot be used to reduce a paying parent's income on their tax return. There's no way to turn that into a tax deduction, and that makes sense. That income would be used to care for the child, regardless of whether the parents are married or divorced.
If someone insists they can opt out, they're thinking about child support (also known as alimony), which changed tax treatment under the Tax Cuts and Employment Act. Child support payments are no longer a tax deduction for the paying spouse or taxable income for the beneficiary. (Alternative foods are also called "spouse foods" and are very rare.)
Is alimony tax deductible?
No. The child benefit is generally not deductible for either parent.
Is child support taxable income?
No. Under federal tax law, child support received is not taxable income. If you receive child support payments, you do not need to claim them for tax purposes or pay income taxes. This also applies to all state tax filing systems.
The bottom line is that there are no taxes on child benefits.
Who pays child support taxes?
The parent paying child support already had taxes deducted from that income when they earned it. It's like a married couple: one parent earns income and pays taxes on it. Then they give the other parent some money to buy groceries or diapers or a new night light for the kids with no tax implications.
Alimony and SNAP/WIC Eligibility
In one of the most confusing corners of American politics, there is a strong relationship betweenChild Support and WIC/SNAP Eligibility. When one parent receives child support, it is generally considered income for calculation purposes.SNAP permission. This is true whether those payments are part of a custody and child support agreement, a court order, or simply a handshake.
Family allowance for divorced parents
If you include an eligible child on your taxes, you may qualify for tax credits. These credits can help reduce the taxes you owe and even lead to a refund. Of value!
In the past, non-custodial parents paying alimony or child support (usually the father) tried to negotiate the right to claim their children. But in a world where child support payments are rare and child support payments don't always come through, I think tax credits should generally go to the custodial parent.
Read our post on the bestTax exemption for single mothers.
Can a non-custodial parent claim the children?
Yeah! Only one parent can claim the child for tax purposes, and the IRS assumes the parent is the custodial parent. But parents who share custody (or even those who don't) can act or negotiate to gain the right to claim the child when she returns. And get those all-important tax credits!
Some divorces require this in your written separation agreement; Others don't. If the separated or unmarried parents do not have a divorce agreement, the Internal Revenue Service grants the default right to the custodial parent.
I strongly encourage divorced mothers NOT to give up this right.You can grant it annually, but if you have minor children, please do not sign it permanently.Because? If he chases you, you have to take him to court to get it back and it is very valuable.
If the non-custodial parent wishes to claim the child upon return, the custodial parent must provide written consent, which is sent with the non-custodial parent's tax return. This is called a dependency exception.
Important: Dependency Waiver
To transfer a child from one return to another (and the tax credits that may come with it), parents must meet these three conditions:
- One or both parents provided more than half of the child's total support during the year (for example, the grandmother did not pay for room, board, etc. for more than half the year because she gets to keep the child entitled to support) . )
- One or both parents have custody of the child for more than half the year (for example, they have not lived with the grandmother for more than half the year because she can claim the child as a dependent)
- The parents are divorced, legally separated, or have lived apart continuously for the last six months of the year.
And they must present Model 8332.
IRS-Formulario 8332
Please read carefully: The non-custodial parent can apply for a dependency exemption only if the custodial parent signs an IRS Form 8332 or provides a substantially similar statement. The non-custodial parent requires written approval to enforce.
Form 8332 is called "Release/Revocation of Release of Child's Right to Parental Release of Child from Custody" because the custodial parent gives up his or her right to claim the child. Do not negotiate this right if you are the custodial parent.
What can divorced parents deduct?
Parents can get some tax benefits by claiming their children for tax purposes. This includes head of household status, child tax credit, child and dependent tax credit, education credit, and medical expense deduction. You can use these loans to pay less in taxes or even get money back from the government.
Continue reading our deep diveTax exemption for single mothers, but here's a quick overview:
Head of household status
head of the family is aSingle or widowed statusDependent parents. It's beneficial because the IRS increases your standard deduction HUGELY, and that reduces your taxable income by at least $6,450.
It's the largest tax cut for single mothers, and to qualify, you need a dependent. Read more about how women can do thisChoose the correct state for the tax return.
Family allowance for divorced parents
The Child Tax Credit is also a benefit for single parents claiming dependents: up to $2,000 per eligible child in tax year 2022, which doesn't expire until their income is over $200,000 for heads of household. Up to $1,500 of this credit per child is refundable, increasing your refund.
Child Tax Credit and Long-Term Care for Divorced Parents
The Child and Dependent Care Tax Credit is one of the best tax breaks for single parents paying for child care. For tax year 2022, the maximum amount of care expenses you can claim is $3,000 for one person or $6,000 for two or more people. The percentage of your eligible expense that you can claim ranges from 20% to 35%.
Again, this loan has a very high income stream and goes to the parent who claims the child upon their return. Check out our other post on how to easily do this.Document child care costs for tax purposesand negotiation.
Educational loans for divorced parents
If you have a dependent for whom you pay tuition or other expenses, you may be eligible for the United States Opportunity Tax Credit (up to $2,500 per student). This is a partially refundable credit. So if you reduce your tax liability to zero, you can get a refund of 40% of the remaining balance (up to $1,000).
The credit is something of a booger: 100% of the first $2,000 of eligible educational expenses and 25% of the next $2,000 of eligible expenses.
Medical Expense Deduction
OIRS allows each parent to deduct medical expenses paid for their childon the income tax return, even if the other parent claims the child as a dependent.
IRS Publication 502 states: “For the purposes of deducting medical and dental expenses, a child of divorced or separated parents may be treated as a dependent of both parents. Either parent can include the medical expenses they pay for the child, even if the other parent claims the child care exemption..."
Again, the child support, custody, and separation rules from Form 8332 (above) apply.
Unfortunately, there are additional requirements that make this deduction unlikely for a single mother who may be the head of a household: claiming a deduction for medical expenses that exceed 7.5% of your adjusted gross income (AGI).
Earned Income Credits
The last credit that can reduce your federal tax bill is the Earned Income Tax Credit or EITC. Eligibility for this credit depends on your marital status, income, and the number of dependent children you claim. If you meet all the criteria, this is a very valuable tax credit – up to $6,935 in 2022.
State Child Tax Credits
In addition to the federal family allowanceSome states may offer loans to their own dependents.. Whether you are eligible depends on your situation and that of your former spouse or partner. In general, if you can claim that child as a dependent for federal purposes, you can also claim any state credits.
Diploma
I am not here to give legal advice or tell you how to structure your family's support after divorce.
But I will argue (strongly!) that the right to claim a dependent is very valuable. At a minimum, avoid negotiating this right in a custody agreement, separation certificate, or divorce decree.
The tax laws do not favor the parents with whom the child lived for a reason: they provide most of the financial support for their dependent children.
In my opinion, these parents deserve an even bigger tax refund and a spa day.