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Child Support payments are not taxable. The parent making the child support payment can’t deduct it from income and the parent receiving the payment does not have to claim it as income. For child support to remain non-taxable, it must be designated in the final divorce decree as “child support.” Although the payment and receipt of child support does not affect your taxes there is one important tax consequence related to child support payments:
In order to claim someone as an exemption the IRS says that you must provide more than half of that person’s total support in a calendar year. A special rule was created by the IRS in order to resolve the question of dependency and who gets the exemption.
The parents must be:
The rule states that the parent who has custody for the greater part of the year is the custodial parent and that the parent will be treated as the person who has provided more than half of the child’s support. In other words if your ex-spouse pays more toward the child’s expenses than you do but you spend more time with the child and are responsible for the majority of child care you will get the child dependency exemption. You, the custodial parent who spends the most time with the child can claim the child as your dependent.
The non-custodial parent can claim the exemption if both parents agree and the following criteria are met:
A written agreement signed by the custodial parent stating that he/she will not claim the child as a dependent.
I would consult with a local CPA or a tax attorney to protect your interests.