No court ordered child support and tax implications

[riding]

What is the name of your state (only U.S. law)? California
My exwife and I verbally agreed upon child support approx a year ago, with no issues to date. Now this was only a verbal agreement and there is nothing in writing (no court order). We have a good relationship and everything is going well with absolutely no issues. I do understand there could be some issues later on if she ever decides to say I never payed Child support (I do have bank statement showing two payments a month of the same dollar amount every month since divorce). So eventually, I do plan on taking the steps to legalize this agreement. But In the mean time, I am wondering if there are any tax pros and cons to my current situation. Any and all info will help, thank you.

 

[Silverplum]

What is the name of your state (only U.S. law)? California
My exwife and I verbally agreed upon child support approx a year ago, with no issues to date. Now this was only a verbal agreement and there is nothing in writing (no court order). We have a good relationship and everything is going well with absolutely no issues. I do understand there could be some issues later on if she ever decides to say I never payed Child support (I do have bank statement showing two payments a month of the same dollar amount every month since divorce). So eventually, I do plan on taking the steps to legalize this agreement. But In the mean time, I am wondering if there are any tax pros and cons to my current situation. Any and all info will help, thank you.

Child support is non-taxable income for the recipient, and the payor is not allowed to deduct child support.

 

[LdiJ]

Child support is non-taxable income for the recipient, and the payor is not allowed to deduct child support.

Agreed. Therefore there are no tax implications at all. Child support is irrelevant to tax.

 

[Zigner]

Agreed. Therefore there are no tax implications at all. Child support is irrelevant to tax.

If the OP is giving more than $13,000 per year (is that the limit still?) then he would be required to file a gift return, but there would likely be no taxes due.

 

[LdiJ]

If the OP is giving more than $13,000 per year (is that the limit still?) then he would be required to file a gift return, but there would likely be no taxes due.

Actually no, he would not be required to file a gift tax return. (and its 14k not 13k) Child support is not a gift for tax purposes (even if it is a gift for family law purposes) even if its paid without a court order.

 

[Zigner]

Actually no, he would not be required to file a gift tax return. (and its 14k not 13k) Child support is not a gift for tax purposes (even if it is a gift for family law purposes) even if its paid without a court order.

Thanks for the clarification on the amount, that's why I asked

If there is no court order, there is no child support. It is a gift to the other parent, no matter what you write on the memo line.

 

[davew128]

Thanks for the clarification on the amount, that's why I asked

If there is no court order, there is no child support. It is a gift to the other parent, no matter what you write on the memo line.

Gifts from one spouse to the other are not taxable or reportable. Now in the case of an ex-spouse as is here, I think this would still fall under providing support to a dependent which isn't a gift.

 

[Zigner]

Gifts from one spouse to the other are not taxable or reportable. Now in the case of an ex-spouse as is here, I think this would still fall under providing support to a dependent which isn't a gift.

He's not giving the money to a dependent. He's giving it to his ex-spouse.

 

[davew128]

He's not giving the money to a dependent. He's giving it to his ex-spouse.

as part of an agreement to support the child.

My exwife and I verbally agreed upon child support approx a year ago, with no issues to date.

The ex is a conduit to support the kid.

 

[Zigner]

as part of an agreement to support the child.

The ex is a conduit to support the kid.

The receiver has no legal obligation to spend the money on the kid(s).

 

[LdiJ]

The receiver has no legal obligation to spend the money on the kid(s).

It doesn't matter. I agree that from a family law standpoint its generally considered to be a gift if there is no court order. However, that is not the case from a tax standpoint. Just like the IRS has their own definition of custody, they also have their own definition of gift. Money paid towards the support of minor children is not a gift, even if its done without a court order.

 

[Zigner]

Thanks Dave and LdiJ for the clarification and corrections of my posts

 

[davew128]

Put another way, even if the ex-spouse DOESN'T spend it on the children, the agreement with the OP and the intent of the OP is that it be spent on the kids as support and that's what matters.