Arons & Solomon | January 26, 2023 | Child Support
When negotiating a divorce settlement, experienced Bergen County divorce lawyers consider the future tax implications for their clients. The terms of your divorce could impact your federal and state tax returns for many years.
For example, spousal support could have several tax implications. The terms of property division might impact resources that could result in taxable income. However, child support does not have tax implications for either parent.
Is Child Support Taxable Income in New Jersey?
Even though parents are not together as a couple, they must support their children financially. A person might not have child custody, but they are required to pay child support. Typically, child support payments continue until the child is emancipated or a court terminates the child support obligation.
New Jersey has child support guidelines for calculating the amount of child support each parent must pay. Several factors determine the amount of child support in New Jersey, including:
- The net income of both parents
- Number and age of children being supported
- How many overnights the child spends with each parent
- Earning potential of both parents
- Uninsured medical requirements and special needs
- Child support and alimony payments from prior marriages or relationships
Child support payments are for the benefit of the child. Therefore, the payments are not taxable income for parents in New Jersey or under federal law.
The support payments do not need to be spent for bills incurred for the child alone. Instead, child support payments are intended to provide for the child’s needs. Therefore, a parent might use child support payments to pay the mortgage, buy fuel for the family vehicle, pay daycare expenses, purchase groceries, pay medical bills, or pay other expenses that provide for the child’s needs.
The Internal Revenue Service (IRS) states that child support payments are not taxable income. Therefore, the parent paying child support cannot deduct the payments from their income taxes. Likewise, the parent receiving child support payments cannot include the payments as taxable income.
The same is not true for spousal support. As a result, spousal support might be taxable income in New Jersey and under federal law.
If you have questions about support payments and taxes, you can talk with an experienced Bergen County child support lawyer.
Can My Child Support Payments Be Modified, and Does That Impact My Taxes?
The courts can modify child support payments if a parent proves a substantial change in circumstances. However, modifications of child support should not impact income taxes, provided the support payments are considered child support.
The parent asking for child support modification has the burden of proving circumstances that justify the modification. Examples of situations that could be considered a substantial change in circumstances include:
- The income for one or both parents has changed significantly since the court issued the current child support order.
- The child’s needs regarding their health care, education, child care, or other necessary expenses have changed.
- A parent had another child with someone else.
- The child is not spending a significant amount of time with one parent instead of the other parent.
- A parent becomes unemployed and cannot locate new employment within a reasonable period after diligently searching for a job.
- A parent becomes disabled because of an accident or illness.
Other situations could justify a modification of child support payments in Bergen County. An experienced child support attorney can assess your situation and advise you of your options.
The first step is to gather as much information and documentation as possible. Examples of documents and evidence include tax returns, pay stubs, evidence of disability, unemployment records, and other evidence of income. You want to speak with an attorney immediately.
Courts modify child support going forward. Therefore, delays in seeking legal advice could mean losing the money you could use to support your child.
When Is Alimony Taxable Income in New Jersey?
Alimony is considered taxable income for federal taxes if your separation agreement or divorce decree is dated on or before December 31, 2018. However, spousal support is not taxed by the federal government if the divorce decree or separation agreement is dated on or after January 1, 2019.
However, that is not the case in New Jersey. Under New Jersey law, alimony received is considered taxable income. Therefore, the receiver reports the alimony payments as income, and the payor can deduct alimony payments on their state tax returns.
However, alimony might not be taxable in New Jersey in some situations. The divorce decree must state that the parties agree not to treat the alimony payments as income or deductions. Other conditions might apply, and you might be required to submit a copy of the divorce decree for review.
Contact the Bergen County Family and Divorce Law Firm of Arons & Solomon Divorce Lawyers for more help
Contact the experienced family attorneys at Arons & Solomon Divorce Lawyers today for legal assistance. Visit our law office in Bergen County or give us a call at (201) 487-1199 to schedule a free consultation with our team.
Bergen County Law Office
1 University Plaza Dr #400, Hackensack, NJ 07601, United States