Does Child Support Get Taxed?

Whether you are going through a divorce and share minor children with your ex, or you will have a separate child custody case after separating from a partner with whom you share minor children, it is important to understand key details about child support. In any child custody case involving minor children, child support will also be decided. Under California law, as you may know, both parents have a responsibility to provide financial support for their children. Indeed, California uses an “income shares” model to calculate child support, which means that the court combines both parents’ net incomes in order to calculate a total child support obligation. Then, the total child support obligation is apportioned to the parents based on their individual incomes and other relevant factors.

Since the income shares model means that parents share the child support obligation, both parents are technically paying child support. What does this mean for taxes for each parent, and handling taxes for child support? In other words, do both parents pay child support? Generally speaking, child support is “tax neutral,” but our San Jose child support lawyers can explain in more detail.

Child Support is “Tax Neutral” 

When it comes to taxes, child support is generally considered to be tax neutral. What does that mean? According to the Internal Revenue Service (IRS), “child support payments are neither deductible by the payer nor taxable to the recipient.” Accordingly, “when you calculate your gross income to see if you’re required to file a tax return, don’t include child support payments received.” In other words, you cannot deduct the amount of child support payments you make, and you are not required to count child support payments you receive as taxable income.

Why would a parent be receiving child support payments if California uses an income shares model? While both parents are responsible for the financial support of their child, it usually works out such that one parent is required to pay more in child support, and makes those payments to the other parent. This can result from significantly different incomes between the parents, or substantially different levels of physical custody. As the California Courts explain, there is often still a primary custodial parent in most custody situations.

Spousal Support or Domestic Partner Support is Taxed 

You should know that spousal support is different from child support in terms of taxes. In support orders before December 31, 2018, the paying spouse can deduct alimony and the receiving spouse must include alimony as taxable income. For support orders after that date, the paying spouse must pay taxes on support paid while the receiving spouse does not have to count the support payments received as taxable income.  This applies to federal taxes.  For California state income tax, the party paying support may deduct the payments from their state taxable income, and the party receiving support must declare the support payment as income.

Contact a San Jose Child Support Lawyer for Assistance 

Whether you have questions about calculating child support or inquiries about any other aspect of child support in California, one of the experienced San Jose child support attorneys at Foster Hsu, LLP can talk with you today about your case. We can provide you with more information about how child support is determined in California, and what you can do to enforce or modify an existing child support order. Do not hesitate to get in touch with us if you have any questions or concerns.

Sources:

leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=FAM&division=9.&title=&part=2.&chapter=2.&article=2

irs.gov/faqs/interest-dividends-other-types-of-income/alimony-child-support-court-awards-damages/alimony-child-support-court-awards-damages-1#:~:text=Child%20support%20payments%20are%20neither,nor%20taxable%20to%20the%20recipient

courts.ca.gov/17975.htm?rdeLocaleAttr=en