Edward R. Weinstein, Esq.Edward R. Weinstein, Esq.

Tax Implications of Child Support in Monmouth County

Taxes are an inevitable part of a divorce, and unfortunately for many couples who are seeking to end their marital relationship as quickly as possible, they do not consider the tax implications of child support in Monmouth County. Specifically, child support payments can have significant tax implications for both parents.

An intelligent Monmouth County child support lawyer can help a parent determine who claims the child on tax filings, can help establish or modify a child support order and can help a parent enforce child support orders already in place.

Child Support Payments

One of the tax implications of child support in Monmouth County, child support payments are considered to be non-taxable. This means that the paying parents cannot deduct them from their taxes. This also means that the parent who is receiving child support payments does not have to include child support as income for their taxes.

At the outset, it is important to understand this concept because it can affect other areas of a parent’s finances.

College Expenses

As stated above, the general rule is that child support payments are non-taxable. However, child support payments may include other types of payments other than those directly to the other parent. One area where there may be significant tax implications of child support in Monmouth County is when it comes to college expenses.

If parents do not have a clear agreement, paying a child’s college expenses may be a taxable payment, however, if parents carefully state in a divorce decree or settlement that one parent will pay a child’s college costs, then this will be sufficient to include those payments as child support.

Interest on Child Support

There are times when one parent may fall behind in child support payments and they may owe the other parent arrears. Not only are there potentially serious implications for owing child support arrears such as the threat of losing driving privileges, and even facing incarceration.

Owing past-due child support also has tax implications such that interest that is collected on past-due child support is not excludable and is therefore considered to be taxable income to the parent receiving these payments.

Alimony Payments Compared to Child Support Payments

Compared to child support payments, alimony payments are taxable. This means that the parent or former spouse who is paying alimony payments may be entitled to a deduction for their payments, and the parent or spouse who is receiving alimony payments will have to include these payments as income.

Often alimony payments and child support payments will be closely intertwined, and a parent may not choose to seek a higher child support amount because they are receiving significant alimony and spousal support. This distinction can have significant tax implications.

For example, if a couple reaches an agreement that provides that the husband will provide the wife and children with $1,000 a month in support, and does not specifically detail whether the payments are going to spousal support or child support, there could potentially be serious tax implications for both parents.

Therefore, it is critical that a parent works closely with a family lawyer to provide clear guidance as to whether payments are intended to be child support or alimony.   Absent clear and precise language delineating that a portion of payments is intended to be child support will mean that the entire payment will be taxable.

Retaining a Child Support Attorney

A Monmouth County child support lawyer can help you consider all of the tax implications of child support in Monmouth County, and how they might impact you.

If you are currently paying child support, are seeking to establish or modify child support, or are a parent trying to enforce child support, an experienced and dedicated Monmouth County child support lawyer can help.