Tax & Other Important Factors Regarding Child Support

We understand you are going to have many questions about child support, which we can answer. For instance, child support payments are not taxable to the recipient. If you are receiving child support, you do not need to report those payments as income on your federal income tax return. That makes the payments more valuable to the one receiving them and more expensive for the one paying child support.Another consideration is the tax exemption available for each child, which can be a valuable tax-saving asset. State courts have no jurisdiction over federal income tax matters, and so your Texas judge does not have the power to decide which parent is entitled to the tax exemption. As long as both parents agree, provisions for the allocation of the tax exemptions can be included in your agreed court order. It is usually a mistake to make any agreements about these tax exemptions except on a year-to-year basis, because circumstances are almost certain to change as the years go by, while the agreement will be unchangeable. The only exception to that rule is when YOU are the person receiving the right to claim the exemption in all future years.When both parents file separate income tax returns claiming the exemption on the same child, the IRS will eventually look into it. Typically, the IRS will either decide in favor of the parent with primary custody of the child or the parent who has provided more than 50% of the cost of supporting the child.As one’s income goes up the value of claiming the exemption begins to phase out. There may also be certain tax advantages for a working custodial parent, associated with the cost of child care. All of these factors need to be taken into consideration to maximize the value of these various items, so as to make the most dollars possible available for your child.If you have any additional questions or concerns, our experienced divorce attorneys are here to help.