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Pay support for children? Can't deduct it

Also, custodial parent claims kids as dependents

This week, more answers to questions about kids and taxes.

Question: I receive child support from my former spouse. Do I have to report it as income?

Question: If I pay child support for three kids, can I write it off on my taxes?

Answer: Child support under a divorce decree is not tax-deductible by the former spouse who pays the money, nor is it taxed as income to the spouse who receives it. (Note that this is different from alimony payments, which are deductible by the ex-spouse who pays them and taxed as income to the one who receives the money.)

Question: My husband and I are divorced and share joint custody of our two children. The kids live with me, but he says he should get to claim one as a dependent because of joint custody. I told him that had he been paying regular child support that would have been OK, but he's only paid a total of $800 instead of the $400 a month he's supposed to pay. Am I correct?

Answer: In cases of divorce, the law generally gives the dependency exemption for children to the custodial parent named in the divorce decree. If the decree doesn't name either parent, the custodial parent is the one with whom the children live for the greater part of the year.

Assuming your children live with you for more than half the year, that means you can claim the children as your dependents no matter how much support you receive from your ex.

It's possible for your ex-spouse to claim the kids as his dependents if you sign a waiver, or if the court decree gives him that right. Otherwise, you, not he, should claim the children on your return.

Question: I have three kids with custodial accounts. Last year they had capital gains, but this year they are all on the negative side. Do they have to file tax returns in their names or can I include their losses on my taxes?

Answer: Sorry, but losses in a custodial account are not deductible on the parents' return.

Losses can be used to offset income on a child's return, such as interest, dividends or capital-gains distributions earned inside the custodial account. Any losses not used in 2000, because your children don't have enough income, can be carried forward and used in future years when their accounts do have taxable earnings.


Have a question about kids and finances for Dr. Tightwad? Write to Dr. T at 1729 H St., N.W., Washington, D.C. 20006. Or send the good doctor an e-mail message (and any other questions for this column) to jbodnar@kiplinger.com.