When negotiating a divorce settlement, child support is critical to ensuring a child’s financial stability and well-being. Raising a child is costly. As such, child support payments can dramatically impact your finances. As such, it’s essential to understand the intricacies of child support taxation in New York. Please continue reading to learn whether child support is taxable and why connecting with a knowledgeable Nassau County Child Support Lawyer is in your best interest.
Are Child Support Payments Taxable?
If you are entitled to receive child support payments in New York, you may wonder whether these funds can be considered taxable income. Contrary to popular perception, child support payments are not considered taxable income. This means you do not have to report child support payments when reporting your federal income tax return each year.
Essentially, these payments are intended to ensure a child’s well-being. Therefore, the funds must remain untaxed to provide critical assistance in covering the expenses related to their upbringing. For instance, if you receive $2,000 per month in child support, you are not required to include this amount as taxable income when filing your state or federal tax returns. This is because parents are entitled to use these funds to provide for the child’s needs, such as purchasing groceries, paying the mortgage, buying gas for the family car, or any other expense for the child’s benefit. The IRS acknowledges that children should not be deprived of financial support due to their parents’ separation.
Are These Funds Tax-Deductible?
If you are a non-custodial parent, you wonder whether child support payments qualify as tax-deductible. Unfortunately, parents responsible for providing child support cannot claim these payments as a deduction on their tax return. When taxpayers claim deductions, certain expenses are subtracted from their taxable income. This reduced their overall tax liability. However, child support funds fall outside of tax-deductible expenses because these funds are utilized solely for the financial well-being of a child. These funds aren’t subject to tax implications or to ensure a child’s needs are met.
Which Parent Can Claim the Child as a Dependent?
Another common question divorcing parents have is who can claim the child as a dependent. Generally, the custodial parent claims a child as a dependent. It’s important to note that a dependent exemption allows you to reduce your taxable income by excluding income from each dependent, a child, or a relative who depends on you to provide for them financially. In the case of a joint custody arrangement, the IRS will give status to the parent with the higher adjusted gross income.
If you are facing issues about child support, please don’t hesitate to contact the Law Offices of Eyal Talassazan, P.C. today. Our legal team is prepared to help you understand the tax implications of paying or receiving child support in New York.