If your divorce decree includes a child support agreement, there may be changes to your federal or state of California income tax returns. The relationship between income tax guidelines and child support payments may be complex, and it is subject to alteration under certain circumstances. The effects your child support payments have on your taxes may change if you modify the custody arrangements or if there are updates to federal or state tax codes.
According to FindLaw, child support payments usually fall outside the IRS definition of taxable income. This means that if you are the custodial parent receiving child support payments, you do not have to include that money when calculating your tax liability. If you are the non-custodial parent and are making child support payments, you may not deduct those expenses to reduce your tax burden.
Child support agreements may also affect your eligibility for certain tax credits, such as the Earned Income Credit or Child Tax Credit. For example, you may qualify for the Child Tax Credit if you claim a child as your dependent. However, you may be able to file a form passing the tax exemption to your former spouse. If you do this, then he or she may be able to claim the Child Tax Credit, even though he or she is not the custodial parent. There generally is not as much leeway with the Earned Income Credit. In most cases, you may not qualify for this particular tax credit unless you are the custodial parent.
This overview of child support payments and income taxes is provided for educational purposes only and should not be interpreted as legal advice.
