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What Are the Tax Implications of Child Support in NJ?
After determining child custody, the court may require a non-custodial parent to pay child support. If you’ve been ordered to pay or are entitled to receive child support, it’s crucial to understand the potential tax implications of these payments. To learn more about child support tax implications in New Jersey, please continue reading and contact a dedicated Ocean County Child Support Attorney.
How is Child Support Determined in NJ?
Parents are obligated to support their children until the age of emancipation. As such, the court may order a non-custodial parent to pay child support. Child support payments are designed to maintain a child’s living standard and ensure access to essentials like food, shelter, and clothing. In New Jersey, gross taxable income must be calculated to determine the net income used to assign a child support amount. Each party’s income is determined based on tax filings with the Internal Revenue Service (IRS). Child support guidelines give a specific amount based on the parents’ combined income, parenting time, and the number of children in the family.
While child support is often determined by the formula put forth in the New Jersey Child Support Guidelines, there are instances in which factors convince a judge to deviate from these standards. These factors include, but are not limited to, the following:
- Age and health of each parent
- The child custody arrangement
- The needs of the child
- The earning capacity of each parent
- The standard of living established during the marriage
- Assets and liabilities of each parent
- Any other relevant factors
What Are the Tax Implications of These Payments?
It’s important to understand that child support is not considered taxable income under New Jersey state law and IRS rules. This means the recipient parent does not have to report these payments as income on their taxes, and the payor parent does not need to report the payment as a deduction. Child support is designed to pay for a child’s necessities, helping ensure the funds go to the child as intended.
Another tax consideration you’ll have to make is who will claim the childcare credit on their tax forms. Generally, the IRS will grant the custodial parent the right to claim the child as a dependent for tax purposes. However, if parents have shared custody, whichever parent is afforded more overnights will be deemed custodial for these matters and permitted to claim the child on their taxes. To ensure legal compliance and maximize deductions, consult an attorney about your situation. Furthermore, if a parent fails to uphold their child support obligation, the state could garnish any tax refused that they received. If a parent is in arrears, the government will dock those funds to meet the past payments.
As you can see, there are several tax considerations you should make when undergoing a divorce. At the Law Office of Sarina Gianna, LLC< we can help you understand your tax responsibilities while raising your child. Contact our firm today to learn more about how we can assist you.
