Child Tax Credit

How Do Child Support Payments Affect Taxes?

Child support payments do not determine which parent may claim a child for income tax purposes, and paying child support alone does not entitle a parent to claim the child or receive related tax benefits.

Under the Internal Revenue Code, the custodial parent (the parent with whom the child resides for the greater number of nights during the year) generally has the right to claim the child when the parents are divorced, separated, or have lived apart during the last six months of the year. For this rule to apply, the following requirements must be met: (1) the child must be in the custody of one or both parents for more than half of the calendar year; and (2) the child must receive more than half of his or her financial support from one or both parents during that year.

The custodial parent may transfer this right to the noncustodial parent by signing IRS Form 8332, allowing the noncustodial parent to claim certain tax benefits, including the Child Tax Credit. Although the tax code still refers to a "dependency exemption," the minor child deduction is set at $0 for tax years 2018 through 2025.

Yes. As the Internal Revenue Code is federal law, a Georgia court has no authority to award the dependency exemption to the non-custodial parent unless the custodial parent voluntarily relinquishes it. Blanchard v. Blanchard, 261 Ga. 11 (1991). This exception is the major exception to the Internal Revenue Code's regulation regarding which parent may claim the exemption, and it is one of the only ways that a non-custodial parent may validly claim the dependency exemption on his or her tax return. A custodial parent may voluntarily relinquish his or her right to claim the dependency exemption by agreeing to do so in a Marital Settlement Agreement. As such, this issue demonstrates yet another reason that it is important to settle or mediate your case because during that process you have additional power that the court does not have in your case.

If a noncustodial parent wishes to claim a child as a dependent they will need the custodial parent to fill out IRS Form 8332. This form is often filled out by the custodial parent during settlement or just after the divorce has been finalized. The custodial parent can use Form 8332 to release a claim to exemption for the child so that the noncustodial parent can claim an exemption for the child. IRS Form 8332 also works to revoke any previous claim the custodial parent would have had to exemption for the child. Form 8332 also allows noncustodial parents to claim the Child Tax Credit. Note that the custodial parent can also relinquish their claim for future years as well as long as they specify this in Form 8332.