Child Support & Taxes

Many people wonder if child support is counted against or as their income for tax purposes. Child support is tax-neutral, therefore, if you are currently paying child support, it cannot be deducted. Conversely, if you are actively receiving child support, it is not considered taxable income. Filing your taxes after a divorce, however, will still change some things on your return due to there being more to take into account.

Exemptions for Dependents
Under the new law, the parent who spends the majority of the time with the child is considered the “custodial parent” for tax purposes and is the only one who can claim their child as a dependent. There are some exceptions to this, which are detailed below. Most children living at home are considered dependents, as long as they meet a few basic requirements, such as:

• Your child is considered a dependent if he/she was under 19 at the end of the taxable year
• If your child was under 24 and a studying for at least 5 months out of the year.
• If your child is disabled
• Your child lived with you for at least 51% of the tax year
• If your child did not contribute to their support more than $4,050.

Illinois law states generally that the custodial parent is the only one who can claim the child as a dependent. However, you and the noncustodial parent may, in some cases, agree to allow the noncustodial parent to make the dependent exemptions for one, or all of the children. The non-custodial parent may take the exemption if:

• You are both legally divorced or legally separated, or lived apart for the latter six months of the tax year
• Your child lived with either both, you, or the non-custodial parent for a minimum of the last six months of the year
• The separation agreement or divorce order states that you may have the exemption, or your spouse signs a legal declaration forfeiting the exemption(s) using IRS Form 8332.

Head of Household Status
Just like married or single, head of household is a filing status that may be claimed if you are determined to be the “custodial parent”. You will receive a lower standard deduction rate, and your tax rate will also be lower than if you file separately as married, or single. You may claim head of household under the following circumstances:

• If you had a child or other qualifying individual living with you for more than six months out of the tax year
• If you have contributed to the majority of your household and/or living expenses during the taxable year
• If you are not married or legally defined as considered unmarried.

While it may seem confusing, an experienced family law attorney can consult you on the appropriate filing status for your situation, and further define what legally constitutes considered unmarried.

Tax Credits
There are several available tax credits for parents aside from dependent exemptions. The guidelines explaining the criteria and standards to qualify for these credits are fairly basic. You may qualify for the earned income credit, for example, if you are a parent who has earned income below the accepted standard for your number of qualified dependents. The child tax credit applies to the parent of a child who is under 17 years of age, who lived with you for over half of the year, and did not contribute more than half of the expenses related to their own support.

Distribution of Child Support Payments

Typically, child support payments go through Illinois State Disbursement Unit (SDU) but amicable parties may choose to pay each other directly. While this may seem the ideal scenario, and works out well for some, there are some things to be careful of. If the paying party fails to make a payment on time, or in the amount agreed upon, further action must be taken to enforce orders. It’s also essential for both sides to provide proof of payment (check, money order, etc). Should the direct payment break down, pursuing a withholding order or similar action may take longer than simply pursuing that method in the first place.

Income Withholding Orders
In the case of an automatic income withholding order, child support would be withheld directly from the parent’s paycheck. In this arrangement, there’s no worry about one side not honoring their agreement as the amount is automatically taken out by their employer. Then the state will process the payment and send it directly to the parent receiving the support order. This is the most typical method of paying child support, as it guarantees proper delivery in the expected amount each month. It also prevents cases of unforeseen, problematic events arising between you and your spouse. This way, both parties are assured that the amount of support and timeliness of the payments are met.

Child Support Enforcement Agency
In Illinois, child support is enforced by the Illinois Department of Health Care and Family Services (DCSS). You can leverage the DCSS to enforce payment collection, processing, and disbursement. In the event of a non-paying spouse, the DCSS has a number of tools at their disposal from garnishing a bank account, to revoking licenses or under more extreme circumstances, fines and jail time.

Use of Support Payments

There are very clear regulations for how the money from child support payments can be used. Child support was established so that both parents continue to contribute to their child’s expenses and should be used on the child’s primary needs such as food and clothing. In some cases, the court may put terms in the child support order for specific items it should be used for such as medical expenses or extracurricular activities.

As stated earlier, in the new law, the obligation for child support will be expected of both parents, as opposed to the non-custodial parent only, in an income sharing model. Sometimes referred to as child maintenance, child support is usually an ongoing payment paid until the child turns eighteen, or nineteen if they’re still attending high school, or if circumstances arise that no longer require child support.

Interstate Family Support Act

If you and your spouse live in different states, the chances for complications in regards to your child support increase. There was a time when multiple states could legally have jurisdiction over child support orders, which lead to multiple orders, overpayment, and conflicting rulings. Luckily, the problem was corrected when the National Conference of Commissioners on Uniform State Laws drafted the Uniform Interstate Family Support Act (UIFSA).

The Uniform Interstate Family Support Act sets up parameters to ensure that only one state is given jurisdiction when it comes to establishing, modifying, and enforcing child support related cases. This act doesn’t apply to child support cases where multiple states would potentially be involved.

Child Support Legal Jurisdiction
The child’s home state, according to the UIFSA, is the state that has jurisdiction over the child support orders. What does this mean for you? It means that the child’s home state determines not only the laws that will be applied but the state which discussions of any further matters will be held. State laws regarding child support vary drastically, so it is important to understand where the law considers your child’s home state.

The child’s home state is generally defined as where the child has lived the last six months. If the child hasn’t lived in a state for six months prior to the trial, the state where the child has spent more time or where they have stronger family ties is usually granted jurisdiction.

Duration of Child Support

The duration of a child support order varies, but in most cases, durations of support lasts until the child turns 18.

High School, College & Trade School Years
In most cases, even if a child turns 18 while in high school, college or trade schools, support will be enforced until graduation. Parents are usually ordered to continue paying support as long as their child remains a full-time student.

The pre-planning of college tuition is a very important step while negotiating an amicable divorce settlement. Even if the child or children are very young, this step cannot be overstated. Considerations should be given to several areas:

• The costs associated with long-term college attendance while pursuing substantial degrees, or multiple degrees.
• The needs of the child while attending college including books and materials, living expenses, and other associated costs.
• Financial aid, student loans and grants.

These options may alleviate some of the financial burden, however, both parents and their current spouse’s income will play a major part in qualifying for these financial assistance programs.

Change of Legal Status
Although remaining a full-time students keeps noncustodial parents on the hook for child support past age 18 there are guidelines in the child support code which ends support obligations. If your child does any of the following support obligations will end immediately.

• joins the military
• gets married
• becomes emancipated