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Child support and tax law

On Behalf of | May 9, 2023 | Child Support

California does not typically consider child support payments as income for the recipient. However, they are also not tax deductible by the individual who pays child support. For the recipient to receive tax-free payment, the court order must clearly state that the payments are child support. If the court order does not specify this, the IRS may not consider the payments as child support.

Child support versus spousal support

Under IRS code 71, spousal support gets classified as alimony. This means that for the recipient it is income. And it is tax deductible by the individual who pays spousal support. This means if an individual receives spousal support they must report it to the IRS as earned income. They will have to pay taxes on the money the same way that they would if they were earning a salary. On the other hand, the individual who pays spousal support can deduct 100% of the payments made.

Family support and taxation

In California, family support is a hybrid situation that is rare. Usually, a support order will mandate spousal support and child support. With family support, both get combined without differentiating between the two.

The tax code treats family support as fully tax-deductible, similar to spousal support. Or it can be 100% nontaxable, like child support. When entering into a family support agreement, both spouses must clarify how to handle support regarding taxation.

Family support is only available if both parties agree to it. When one person decides that they would rather not have family support, the support structure will be adjusted to a typical spousal support and child support structure.

The relationship between child support and taxation can be a challenge to understand. However, it is worth it for all parties involved to become familiar with the relevant tax codes to ensure that all laws are being followed.