Child support does not qualify as taxable income by the parent who receives the payments. Neither current child support payment nor back child support payments constitutes taxable income. As such, a parent who receives child support is not required to claim that money as income on his or her federal tax return.
Child Support & Federal Tax Deductions
Child support is not tax-deductible by the parent who is paying the child support. Furthermore, paying child support does not always entitle a parent to claim the child as a dependent on his or her income tax return.
For the purpose of federal income taxes, a child of parents who are divorced or separated is most often treated as the qualifying child of the custodial parent. However, the non-custodial parent – who is usually the parent paying child support – may claim the child for the purposes of the dependency exemption and the child tax credit in certain circumstances.
A non-custodial parent may claim the child if the parents are either divorced or separated under a legal or written separation agreement, or if the parents have lived apart at all times during the last six months of the year. Additionally, all of the following must be true:
- The child received more than half of his or her support during the year from his or her parents
- The child is in the custody of one or both parents for more than half of the year, and
- The non-custodial parent attaches IRS Form 8332, or a similar statement, signed by the custodial parent.
If all of these conditions are met, the parent who pays child support may be entitled to claim that child as a qualifying dependent for the purposes of the dependency exemption and the child tax credit.
Back Child Support & the Treasury Offset Program
The Department of Treasury’s Financial Management Service (FMS) is the entity that issues tax refund to taxpayers who have overpaid their tax obligations. FMS also has the authority to offset a taxpayer’s tax refund to pay certain liabilitys, including past-due child support. FMS offsets millions of dollars in federal tax refund proceeds each year to pay child support that taxpayers have failed to pay.
Pursuant to federal child support laws, all states participate in the Treasury Offset Program. In most cases, the child support agency in the state in which the child support liability is owed will send a notice to any taxpayer whose child support liability has been submitted to the Treasury Offset Program. This notice typically outlines appeal procedures for a taxpayer who does not believe the child support liability is owed, or that the amount of the liability is incorrect. If a taxpayer is unclear as to which agency or state has submitted the liability for offset, the taxpayer can contact FMS for the address and phone number of the applicable agency.
Once the offset occurs, FMS also sends the taxpayer a notice that details the original amount of the taxpayer’s federal income tax refund, the amount of that refund that FMS has offset, and contact information for the agency receiving the offset proceeds. If a taxpayer’s federal income tax refund is greater than the amount of the child support liability owed, the taxpayer will receive the remainder of the refund after the child support liability is paid in full.
The Treasury Offset Program & Injured Spouse Relief
If a taxpayer owes a child support liability that has been submitted to the Treasury Offset Program, and files a joint federal income tax return with his or her spouse, the spouse does not become responsible for the child support liability. Rather, the spouse can file IRS Form 8379 – Injured Spouse Allocation, to claim his or her portion of the joint tax refund. A spouse can file Form 8379 along with the joint tax return, or by itself. Within approximately eight weeks, the IRS will compute the portion of the tax refund that belongs to the spouse who does not owe the child support liability, and refund that portion to the spouse before the offset occurs.