Is Child Support Considered Income in NJ?
After a divorce, you have to deal with several big changes. Not only are you no longer married and potentially fielding a child custody arrangement; you’ll also be dealing with several complex financial issues. You’ll likely need to adjust your insurance coverage and retirement plans, you may need to find a new place to live, and your tax status changes. Divorce raises many complicated financial questions. One question we commonly hear from divorced or divorcing clients: Does child support count as income? Will I suddenly owe more in taxes after my divorce? Continue reading to learn about how New Jersey and the IRS treat child support for tax purposes, and call a knowledgeable New Jersey child support and divorce attorney with any questions.
Child Support Is Not Taxable Income, Nor Is Paying Support an Income Deduction
Under New Jersey state law and IRS rules, child support is not considered taxable income. If you are receiving child support under a court order following a divorce or other court proceeding, you do not have to report those payments on your tax return as income. Your tax bracket and tax burden should not be affected by your child support award.
By the same token, if you are paying child support, you cannot claim those payments as a tax deduction. Child support is not considered a deductible expense for federal tax purposes or New Jersey state income tax.
Claiming a Child as a Dependent for Tax Purposes
While child support payments are not tax deductible, there are tax advantages to claiming a dependent child on your tax returns. When you’re married and filing jointly, claiming your child as a dependent is more clear-cut. It can quickly become complex and confusing when you and your ex have a shared custody arrangement.
Generally, only one parent can claim a qualifying child as a dependent at a time. Per IRS rules, divorced parents cannot double, share, or split the tax benefits for claiming a dependent child on their tax returns. Typically, the custodial parent–the parent with whom the child resides for the majority of nights in a given year–has the right to claim the child as a dependent. If the child resides with the parents an equal number of nights, the IRS considers the custodial parent to be the parent with the higher adjusted gross income.
IRS rules, however, allow the custodial parent to release their dependency exemption and essentially give the dependent child deduction to the noncustodial parent. Special forms must be submitted, and special rules apply.
If you intend to claim your child as a dependent on your New Jersey or federal tax return, make sure to discuss your plan with a qualified attorney. Even a simple mistake may be seen in a very negative light if the government believes you and your spouse are trying to dodge taxes.
Call for Trusted Legal Advice and Representation for Your New Jersey Divorce or Child Custody Dispute
If you have questions about your child custody or child support dispute, or if you are dealing with divorce, alimony, or other family law matters in New Jersey, contact the Law Office of John B. D’Alessandro in Union to discuss your concerns. From temporary orders for child support while your divorce case is underway to final orders or post-divorce modification motions, our comprehensive and successful family law attorney is here to advise and represent you.