Although payment or receipt of child support has little impact on the income tax return of a California parent, there are some tax-related issues to consider related to child custody. Unlike alimony, which can be deducted by the paying party, child support is not deductible. Similarly, the parent receiving child support does not need to report these funds as income. In the case of alimony, there is a requirement to report the received funds as income. As a parent considers tax deductions and credits for children, however, it is important to be clear about one's rights.
The parent spending the most time with a child is typically entitled to any child tax credit for that child. However, the non-custodial parent might provide more than 50 percent of the support for their child. To accommodate the non-custodial party's request to claim the child, it is necessary for both parents to enter into a written agreement and also to sign Form 8332, which the non-custodial parent must attach to their tax return. It may be easier for this matter to be worked out in a formal divorce agreement to ensure that there is no confusion going forward.
In some cases, parents may alternate years for claiming a child. It could also be negotiated as parents work through the settlement process prior to finalization of a divorce. By having this clarified in the divorce decree, there is less risk of misunderstandings and errors over the matter in the future.
A parent who has not received appropriate child support payments cannot automatically violate terms of a decree related to issues such as visitation. However, such a parent who is having financial difficulties because of the other party's failure to pay child support might want to have the assistance of an attorney in seeking an enforcement of the order.