What are the tax implications of child support?

Child support is not deductible to the payor nor taxable to the recipient.

However, child support that is paid pursuant to a judge’s order or an agreement before May 1, 1997 can be deductible and taxable if they have the following features:

• The parties must be living separate and apart when the payment is made;
• The payments must be considered an allowance payable on a periodic basis;
• The support payments were made for spousal support or child support (or both), and the recipient has total control over how the support payment is used;
• The support payments must be made directly to the recipient spouse;
• The support payments were made in the year or year prior to the judge’s order or agreement;
• If the payment is made to a (former) spouse,
  • The parties must be living apart by reason of a breakdown of the marriage
  • The support payment must be made pursuant to an order of a tribunal or written agreement (such as a separation agreement); and
• The support payments were made pursuant to that order or agreement.

It is interesting to note that if a judge orders both spousal and child support, payments will first be treated as child support and then spousal support for tax purposes. That means that all child support must be paid to the recipient before the payor can claim a deduction on his income taxes for spousal support.

To learn more about child support and the tax implications as well as the services provided by Krol & Krol, call 905.707.3370 today.