How Does Paying Child Support and Alimony Affect Your Taxes

Child Support, Alimony and Taxes

Recently the IRS ruled that parents who pay child support would be allowed to consider their own children as dependents when it comes to Health Savings Accounts and Medical Savings Accounts. This is a step in the right direction!

Traditionally there have been few if any tax benefits from paying support. Now, however, the IRS has begun to recognize that parents - usually fathers - will be more diligent about paying support obligations if they also receive a tax benefit when they do. Under current tax law, alimony is deductible, child support is not.

How fair is this? Think about these issues:

1. Child support is paid by "non-custodial parents", who do not have tax exemption or child tax credit benefits for their own children. They get double hit when they now have the added cost of paying child support they cannot deduct.

2. Meanwhile the other parent gets the extra income from child support, but also has the benefit of taking the tax exemptions and child tax credits for having the children in her home.

3. Usually alimony is only paid by someone who has made lots of money and can afford it - yet they still get a tax deduction. The tax system is regressive in this way as lower income taxpayers paying child support cannot deduct their payments, but higher earners can deduct alimony - and may be able to use that as a bargaining chip to pay little or no child support.

To be sure you take full advantage of the deductions that are available to you, use a tax service such as TurboTax Online to calculate and prepare your taxes. Be sure you don't miss out on any benefits you're entitled to receive!

TurboTax Online lets you use their software and calculators for free. The only time you are asked to pay is if you decide to print or efile.