After a divorce, you may receive a court order to pay child support. Understanding how this works on your taxes, whether you receive it or pay it, will make a difference as you file your taxes in the future. Here is what you should understand about taxes and child support.
How child support affects your taxes comes down to your divorce settlement. It's important to hire an experience divorce attorney to ensure you receive the best settlement possible, when it comes to the child support.
If you pay child support, you won't be able to deduct this amount form your income, while the person receiving it won't need to claim it as income, either. However, for this support to remain non-taxable, it has to be designated at "child support" in the final divorce decree. Even though paying and receiving child support won't affect your taxes, you should understand some of the tax consequences of child support payments.
Only one of the parents can get the Child Tax Exemption and the IRS states that the parent proving more than have of the child's total support within the calendar year gets this exemption. The parents have to be legally separated or divorce, as well.
The parent with custody of the child for more than half the year is considered the custodial parent and receives the exemption. However, if both parents agreed the other parent would receive the exemption in the divorce decree; this may be different for some couples.
It's important to understand the final divorce decree before filing your taxes. If you're in the process of getting divorced or considering divorce, make sure you hire an experienced family law attorney. This will help you avoid any of the potential issues you may face in the future, after the divorce.