Welcome to the third installment of “During the Divorce Process.” Thus far, we have covered the ins and outs of asset division and alimony during divorce proceedings. Today’s blog post will dive into the details of a topic that is a huge component of divorce, and for good reason: child support. One of the most common statements I hear from divorcing couples from the outset is “We want this split to be as easy as we can possibly make it on the children.” While two people may find that they are no longer compatible, most can still agree without hesitation that they want the absolute best for their children, even in the hardest of circumstances that a family can go through. In order to do that, educating yourself on how the children will be cared for and considered in the eyes of the court is of utmost importance. Since child support considerations can vary at the state level, I want to reiterate that by no means am I giving my readers legal advice here, I am merely discussing these issues for educational purposes. Any reader who is contemplating or involved in a dissolution proceeding should confer with their attorney to get legal advice in light of their specific circumstances and the laws of their state of residence.
While the general public may be familiar with the overall concept of child support, it’s important to know the details so you can ensure your children’s needs, both physical and emotional, will be tended to throughout the divorce process and provide a result that sets your children up for a successful future. Usually the noncustodial parent pays child support to the custodial parent to help cover costs relating to the care and well-being of the children, such as food, housing, and clothing. To say the government and the courts put a huge emphasis on child support is an understatement. The federal government literally approved legislation to cut federal financial assistance to states that did not implement child support guidelines. Thus, all states now have child support guidelines. Each state may have its own variant of those guidelines, but all state guidelines explain the rules for calculating the amount of child support that a parent must provide for their child. While every state has child support guidelines, parents can deviate from these guidelines for various reasons, as long as the court approves the agreement.
If you read my second installment of “During Divorce” about spousal support, you may remember my discussion of modification of spousal support, where I noted how child support is another factor in a separation agreement that should be flexible enough to be modified. The reason here is similar to what it was in spousal support: what if one spouse loses their job, becomes disabled, or passes away? What happens to the care of the child then, when the custodial parent was relying on this additional amount of money to care for the children? Thus, the potential for changed circumstances gives rise to the need to provide that child support is modifiable.
If you are fluent in lawyer-speak, you are probably now asking yourself “Okay, what does the court deem as substantial enough to modify child support?” This is where the state guidelines come into play, as the court sorts out what the new child support agreement will look like. If you are the noncustodial parent paying child support, you cannot make the decision on your own to reduce child support due to a change in income, or the children spending more time at your house than previously outlined, or for any other reason. You need to get that adjustment approved by court order or you are still liable for those full payments as previously agreed upon. Keep in mind, child support payments take precedence over spousal support, so if you are adjusting child support in your divorce agreement, you may well be adjusting spousal support as well.
Now let’s talk a bit about how child support is considered tax-wise. Child support payments are not included in the income of the recipient and are not allowed to be deducted by the payor of the support. Sometimes the line between child support and spousal support can be blurry, so legislation was passed in order to explain the inherent difference. If any amount specified in a divorce or separation agreement is (1) reduced upon the happening of any contingency relating to the child or (2) at a time that can be clearly associated with a contingency relating to the child, then the amount of reduction will be considered child support, not spousal support. The contingency does not actually have to occur and cause a reduction in order for the payment to be considered child support.
Furthermore, a question that will come up in child support conversations during a divorce is which parent can claim the child dependency exemption*, since a child can only be claimed by one parent. First and foremost, if a child is living with a grandparent or someone other than a parent for over half of the year, neither parent can claim the child dependency exemption. Generally, the parent that has custody of the child for the majority of the year claims the child dependency exemption since they are viewed as providing over half of the child’s support throughout the year.
However, the custodial parent can transfer the right to claim the exemption to the noncustodial parent, either for one year or multiple years. To do so, a tax form (Form 8332) has to be filled out by the custodial parent and attached to the tax return of the noncustodial parent, basically releasing the custodial parent’s right to claim the exemption for the year.
While the child dependency exemption can be claimed by either the custodial or noncustodial parent, the child tax credit, childcare expenses, and Head of Household status can only be claimed by the custodial parent. If a divorced couple has more than one child, they can also divide the exemptions. Communicating which parent is claiming which child is very important, as the IRS is sure to audit if they see a child listed on more than one tax return.
Other tax credits that will come into play in a divorce between a custodial and noncustodial spouse is the childcare tax credit (can only be taken by the custodial parent), child tax credit (can be claimed by custodial or noncustodial parent if certain requirements are met), and the earned income credit (generally reserved for the custodial parent and can only be claimed by low to moderate income working individuals and families).
Tune in next month for my last installment of “During Divorce,” where I’ll discuss tax implications to consider when going through your divorce proceedings.
*The child dependency exemption was reduced to $0 from tax years 2018 to 2025, but not repealed. Congress reduced this exemption instead of repealing it so that they wouldn’t have to edit a plethora of other areas of the tax code that refer to the child dependency exemption.
