
When going through a divorce, it’s imperative to understand that the decisions you make can have impacts on your taxes for years following your separation. One question many divorcing parents have is what the tax implications of child support are. If this reflects your circumstances, you’ll want to keep reading to learn whether or not this income is taxable and if there are any additional implications you must know about. Additionally, you’ll discover how a Somerset County child support attorney can assist you with any additional questions or issues you have regarding these matters.
Is Child Support Taxable?
In New Jersey, child support is not considered taxable income. As such, the recipient parent will not have to report the funds they receive on their tax returns each year In the same vein, the paying parent cannot use their payment to receive a tax deduction. This is because the Internal Revenue Service (IRS) considers child support a “tax-neutral” expense.
It is imperative to understand, however, that this does not apply to spousal support. As such, you may need to speak with an attorney to determine whether or not your alimony payments are considered taxable income.
Are There Other Tax Implications for Child Support?
You should know that the custodial parent does have the ability to claim the child as a dependant on their return. In instances where parents share custody, only one parent can claim the child. As such, the IRS will consider the parent with the higher income to be the custodial parent.
However, the IRS also allows parents to “switch” or take turns claiming the dependant. Though this process can be complex, it allows both parents to reap the benefits tax benefits of claiming the child as a dependant. Generally, you must file a considerable amount of paperwork, such as a form to release your dependency exemption. This allows the non-custodial or lower-earning parent to claim the child on their taxes instead.
What Should I Do if I Have Questions?
As you can see, there are many nuances surrounding taxable income and support payments. Many parents try to navigate these matters on their own, which can lead to unfavorable outcomes for years to follow. As such, it’s in your best interest to connect with an experienced attorney who can help guide you through these matters to receive the best possible outcome for your circumstances.
At the Siragusa Law Firm, we understand how overwhelming a divorce can be. That’s why our team is committed to fighting for you during these challenging times. You can trust that your case is in competent hands, allowing you to focus on the next chapter of your life. Reach out today to discuss your concerns with a member of our team.