Child support factors into the financial decision-making for many people. Whether you are the custodial parent receiving child support or the parent paying child support, understanding when and how child support may be considered income is critical when it comes to taxation, government support programs, and other financial planning measures.
Every situation is different. Consulting a Frisco family law lawyer is your best bet for understanding your unique situation—but we can help you understand the guidelines.
Does child support count as income? When and how it may
Child support is not be considered income to the person receiving the child support payment. There are several common scenarios that arise for families who receive child support, and the non-custodial parent’s child support obligation.
Child support and federal income taxes
The Internal Revenue Service (IRS) does not consider child support payments received as income for tax purposes. So, you do not have to claim payments you receive from your child’s other parent as taxable income. This can make a considerable difference for parents who may depend on a tax return for large purchases or who are on the cusp of moving into a higher tax bracket.
If you’re the paying parent, though, you may not be so fortunate. The IRS does not permit you to deduct child support on your tax return.
Child support and eligibility for the earned income credit
Per the IRS, child support isn’t calculated as income when applying for the Earned Income Tax Credit (EITC). This is a tax credit intended for people in lower income brackets who have a job and meet certain other qualifications.
While it’s not required by the IRS to have a child in order to qualify for the EITC, the qualifications are more stringent if you aren’t claiming a dependent child. If you’re not the custodial parent, you may be ineligible for the EITC, although we recommend speaking with a tax professional to be sure.
Child support and loan eligibility
You wouldn’t think that receiving child support, or being court-ordered to pay it, would affect how lenders view you as an acceptable risk for car, home, or other loans. However, many lenders consider child support when deciding whether to extend your credit.
For example, if you are the recipient of child support payments, lenders may consider this as income when determining whether you qualify for an income-based loan. And, conversely, if you are the paying parent, a lender may consider the amounts of child support you’re obligated to pay when determining the maximum amount they’re willing to loan you.
Government assistance eligibility and child support
Most public assistance programs, like Medicaid, Medicare, and Temporary Assistance for Needy Families (TANF), which is a cash payment for extremely low-income people, are income-based. Many single-parent families may qualify for these benefits (depending on their household size and income). For many families, especially those in which the custodial parent has been out of the workforce for some time, these programs and others, like the Supplemental Nutrition Assistance Program (SNAP), are a boon and a significant helping hand.
However, many programs have a unique way of handling child support recipients. If you’re approved for SNAP, TANF, Medicaid/ CHIP, and similar programs, your child support money may be redirected to the state as reimbursement for the expense the state incurred by providing you these benefits. So, you may only get a portion of your court-ordered child support amount—or none at all.
You may run into other issues with child support, too. It may be, depending on the program in question, classified as unearned income, and affect your eligibility for state-provided public assistance. The Texas Health and Human Services’ healthcare program for indigent families, the County Indigent Health Care Program (CIHCP), counts child support as unearned income. So, your family may not qualify for other health insurance, but because you receive child support, you may have too high an income to be eligible for this program.
Get answers to your child support questions — Trusted help from Frisco family law attorneys
Do you have questions about your child support obligations? From non-payment issues to changing the amount you receive, our Frisco family law attorneys are ready to help you. Please contact Albin Oldner Law today at (214) 423-5100 for a consultation.
