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How Child Support Affects Your 2023 Taxes

Depending on which side of the order you’re on, child support may help or hurt your monthly budget. These monthly payments are one of the most important ways the state of Oregon ensures that a child’s legal parents provide for them until adulthood. However, while they play an essential role in providing custodial parents with the resources to raise their kids, these payments can complicate your finances when tax season rolls around. 

Tax law surrounding these payments is complex and has seen significant changes over the past several years. Before you file your taxes for last year, it’s essential to understand how paying or receiving child support may impact your total tax burden. 

Child Support and Federal Taxes

According to the IRS, child support is not considered income for the receiving party. Neither is it a deductible expense for the paying party. These payments are considered a parent’s obligation to their child, not a donation or gift. Essentially, money sent and received as ordered to provide for children is regarded as money that would have been spent on the child if the parents remained together. Since parents may not deduct funds spent to feed or clothe their kids, they may not deduct support.

What does for your federal tax bill? If you are the parent who receives the funds, it’s good news. These monthly payments are essentially tax-free money. You do not need to include them when calculating your gross income; they will not increase your IRS obligations. 

However, if you are the paying party, this is a problem. No matter how high your monthly payments are, you cannot write them off on your federal taxes. 

In addition, while paying or receiving support may not affect your tax bill, failing to pay could impact you significantly. The federal government is not often directly involved in child custody. Instead, it is left to state governments to legislate and enforce these orders. The exception is when a parent subject to a support order is significantly delinquent in paying what they owe. 

In that case, the federal Office of Child Support Enforcement (OCSE), a subset of the Administration for Children & Families, may step in. States may request this office take action against the delinquent parent to pursue the unpaid funds. The OCSE may:

  • Intercept your federal or state tax return to submit it to your co-parent
  • Order your employer to withhold income from your paycheck to cover the unpaid amount
  • Withhold other federal payments such as Social Security, retirement, and additional funds that may be sent to you from the government

In short, if you have not provided ordered payments, you may not receive a tax return even if you would otherwise be owed one. 

Child Support and Oregon Taxes

Oregon follows federal standards regarding the taxability of child support. The amount you pay or receive will not increase or decrease your state tax obligations. This is considered equitable due to how the state calculates support orders

The primary considerations for these orders are how much time each parent spends with the kids and the total gross income for both parents. If two parents have relatively similar incomes, the parent with primary custody will likely receive support, and the other party will pay it. However, suppose one parent has a significantly higher income than the other. In that case, they may be ordered to send money to the other even if the higher-earning party has primary custody. 

This is intended to prevent lower-earning parents from facing an unfair financial burden and to help the children maintain a similar quality of life regardless of which parent they are with. By requiring higher-earning parents to pay their co-parents even if they have primary custody, the state gives the lower-income party more financial flexibility, ensuring the children will not struggle when they change households. 

Preparing to Pay Taxes If You Have a Child Support Order

If you haven’t paid taxes before with a support order in place, there are a few things you should keep in mind:

  • Reporting income and expenses: You don’t need to report any support you receive as income. However, if you’re the custodial parent, you may need to report costs such as childcare to minimize your tax bill.
  • Deductions: You may not deduct these payments from your state or federal taxes. However, you may have the right to dependent tax credits. If your child spends more than 50% of the year with you, you can file as a head of household, granting you several exemptions and deductions, such as the dependent tax credit and the childcare credit.
  • Returns: If your taxes are filed correctly, and you are up-to-date on your payments, your order should not affect your tax return. However, if you are delinquent on support payments, you may find that part or all of your return is withheld to cover that debt. 

Pursue Child Support That Fits Your Budget

Both federal and state tax law treat support the same in Oregon. This helps keep matters simple, but it can strain your budget if you are the party ordered to pay. But providing for your kids isn’t supposed to be an undue burden. If you’re worried that a support order may make it difficult to pay your bills, or if your financial circumstances have changed and you can’t afford the amount ordered, don’t hesitate to get help. 

At Regele Law, LLC, we are dedicated to helping clients put their families first by pursuing fair and equitable child support and custody arrangements. We can help you request a modification of your order or rebutt the amount calculated by the court to better fit your family’s needs. Schedule your consultation today to learn more.