As the year winds down, people in San Antonio will often start to turn their attention towards collecting information for their taxes. Reporting one’s taxes is already a complex process. Adding the payment or receipt of child support to the mix may only serve to complicate it further. Both those making and receiving such payments often share a great amount of confusion as to how they may affect one’s tax status. As incorrect information on a tax form can result in scrutiny from the Internal Revenue Service, it is important to understand the tax implications of child support prior to preparing one’s taxes.
According to the website 1040.com, those who receive child support are not to count it towards their taxable income. While this may result in them being placed in a lower tax bracket, it also may disqualify them for certain tax credits determined by earned income.
The people that are paying child support are also not allowed to deduct the amount that they paid from their yearly income. However, the fact that they remain responsible for supporting their children could potentially qualify them for a dependent exemption.
In most cases, custodial parents are the only ones who are allowed to claim their children as dependents. However, an exception is made for divorced couples. The custodial parent is allowed to let the non-custodial parent paying child support to list the children on his or her return as dependents, thus qualifying him or her for the exemption. This benefit is often outlined in the divorce decree. Yet parents without such a stipulation can still choose to allocate the exemption to the other. The custodial parent simply needs to complete an IRS Form 8332, which the non-custodial parent will then include as part of his or her return.