Whether you are the payor or recipient of child support in Massachusetts, there are 5 tax rules you should be aware of.
CHILD SUPPORT – DEPENDENCY EXEMPTION – FIVE (5) RULES
1.Taxable v. Deductible. Receipt of child support is not reported as taxable income and child support payments are not tax deductible by the payor.
2) General IRS Rule – Dependency Exemption. The custodial parent (defined as the parent having actual custody of a child for the greater portion of a year is entitled to claim the child as a dependent unless the custodial parent affirmatively waives the right to claim the exemption in writing and the writing is attached to the non-custodial parent’s tax return. This rule encompasses both married parents and parents who never married each other.
3) IRS Waiver Form 8332. The IRS waiver must be written and can be for a single year, a number of years, or permanent. A signed IRS Form 8332, “Release of Claim to Exemption for Child of Divorced or Separated Parents” must be attached to the non-custodial parent’s tax return. Subject to a grandfather provision for older decrees, the IRS will strictly enforce this requirement.
4) Judicial Authority – Allocating Exemption to the Non-Custodial Parent. In Massachusetts, a court may allocate tax dependency exemptions to a non-custodial parent incident to the determination of child support and physical custody provided that the court finds such allocation is in the best interests of the child.
ALTERNATING EXEMPTION BETWEEN CUSTODIAL AND NON-CUSTODIAL PARENT
In appropriate cases the court may order or approve an agreement that allocates the exemption to the non-custodial parent on alternating years. Such provisions are usually accompanied by a requirement that the non-custodial parent be current with all child support payments by December 31st of the year the exemption is to be claimed. For enforcement purposes, some judges include provisions that require the custodial parent to cooperate in the signing of IRS form 8332 allowing the non-custodial parent to claim the exemption.
5) Other Tax Benefits Available Despite Waiver of Exemption. Even if the dependency exemption is awarded to the non-custodial parent, certain tax benefits are still available to the custodial parent: For example:
a. Medical Expense Deduction: A child of parents who are divorced or separated or lived apart for more than the past 6 months is treated as the dependent of both parents for purposes of the medical expense deduction. Accordingly, a child’s medical expenses paid by a parent can be claimed as an itemized deduction even if the exemption for that child has been waived or awarded to the other parent.
b. Child Care Credit and Earned Income Credit: The custodial parent can claim the child care credit and the Earned Income Credit even if he/she has relinquished the dependency exemption.
c. Head of Household Filing Status: If the dependency exemption is waived, the taxpayer can still claim the lower “head of household” rates, so long as the taxpayer has custody of the dependent for more than half the year.
If you are paying child support or you are receiving child support payments and you have experienced a significant change in your financial circumstances or your children’s needs have changed due to educational, health or other important reasons, Attorney Renee Lazar can assist you with modification of existing child support orders to protect your family’s interests.
You may want to increase or reduce your child support obligations for a variety of reasons such as having necessary expenses that have not been accounted for or having a disability that affects your ability to seek or continue employment.
Perhaps you have not as yet finalized your divorce or paternity action and are seeking to get child support while your divorce or paternity action is pending. Whatever the case may be, call to get your situation evaluated by an attorney who will help to ensure that your children obtain the support that they require.
For your child-support related issues, contact Attorney Renee Lazar either through email or telephone 978-844-4095 to schedule a FREE one hour no obligation consultation.