As Texas residents consider gathering information for their tax returns, those with child support income or obligations may wonder about how this issue affects their taxes, especially if this is the first tax year for which child support has been a part of their lives. This is actually a simple issue as child support does not afford a paying parent a deduction, and there is not an obligation to report child support that has been received.
Deductions and tax credits may become issues of interest during the tax season. A child can only be claimed as a dependent on one parent's tax return, and similarly, any possible child tax credits can only be claimed by one party. These financial benefits cannot be divided. In most cases, the parent who has custody has the right to claim the child tax credit. However, there may be cases in which there will be no financial benefit for the custodial party to claim the child. In this case, IRS forms dealing with custody and claiming rights must be signed by both parents and attached to the return of the parent taking the deduction and credit.
As matters of custody and child support are being worked out during divorce negotiations, it may be prudent to address the tax implications. A parent who will contribute the majority of support for the child's care might request the right to claim the child even if they will not have primary physical custody. Another option may be creating a rotating schedule of years in which one party and then the other will have the right to claim the child for tax purposes.
As a person heads into divorce proceedings, a collaborative approach might be possible if there is a willingness to work together on solutions related to property division, child custody, and other practical matters. Legal assistance is still important during this process to ensure that any agreements made can be enforced in the future.