Skilled Lawyers Navigating Child Support and Tax Landscape in NJ

Family Attorneys Informing Clients on Child Support and Tax Issues in Tinton Falls, Jackson, Freehold, and Towns Across Monmouth and Ocean County, New Jersey

New Jersey does not have a specific formula for calculating taxes regarding child support. Each parent’s income is considered, and the tax returns are used to demonstrate income and expenses related to the care and welfare of the child. Only one parent can use the child deduction on their tax form. Some parents opt for a year-on, year-off policy, where one will use the tax break one year, and the other will use it the following year, and so on. Others request that the child support reflects the tax deduction, allowing the parent who receives the deduction to receive less support. It is a difficult situation to solve and should be managed with the help of a child support attorney.

Consulting a child support attorney can clarify New Jersey’s tax implications. If you and the other parent file taxes separately, claiming the child as a dependent may yield savings. Notably, child support, whether paid or received, is tax-free. For a thorough grasp of your tax responsibilities in child-rearing, seek advice from both an accountant and a specialized family lawyer who handles child support and related matters. The Bronzino Law Firm’s attorneys serve clients in Red Bank, Manchester, Wall, Little Silver, Manasquan, Lacey, and other towns across Ocean and Monmouth Counties. Contact our Brick or Sea Girt offices at (732) 812-3102 or complete our online contact form; we can assist with your child support case, enabling you to make the optimal decisions for both yourself and your children.

Primary Laws and Rules Governing Child Support in New Jersey

According to the New Jersey Rules of Court Appendix IX-A In the Use of Child Support Guidelines, child support is the responsibility of both parents. It is based on the income and expenses of both households. Children should not have to face the repercussions of economic issues by either parent. The Court attempts to make financial decisions that provide financial support to the children in a way that simulates an intact family. While it is acknowledged that two households will always be different from an intact family, the goal of the Court is to prevent any child from living in poverty due to the separation of their parents.

The courts have a table to help calculate child support, but they can change the amount if other important circumstances exist. Typically, they use each parent’s income, children’s living arrangements, medical insurance costs, daycare costs, and any other information that the court deems valuable. Child support is intended to cover food, shelter, clothing, health insurance, school supplies, school transportation (if required), childcare, visitation travel costs, and any other necessary expenses, such as emergency medical or dental expenses.

Comprehensive Insights into Child Support Income Inclusions

The law requires all sources of income to be used:  overtime, unemployment benefits, bonuses, and commissions must be added in. If a parent is unemployed but can work, the court will assign an amount comparable to their income had they been employed. There are few tax deductions that will affect how child support is calculated. After the income for each parent has been exacted, their net earnings are combined to indicate the family’s net income. A basic child support total is determined by the chart in the guidelines for the number of children and the combined income. The division of support for each parent is based on which parent earns the most. The number of days for visitation also affects the support amount. If one parent has a more significant percentage of parenting time, their expenses while with the child would be greater, meaning the other parent would pay more for support. The law is very clear about child support not leaving the paying or the receiving parent in conditions of poverty.

The duration of support can be determined in the divorce agreement if both sides accept the plan. At the age of 19, a child’s support ends unless they are at a 4-year college full-time, are disabled, or are in a DYFS placement. Support guidelines for a combined income of over $187,200 indicate a minimum level of support with no guidance on a maximum amount.

Calculating Gross Taxable Income and Net Income in a Child Support Scenario

Gross taxable income must be calculated to determine the net income used to assign a child support amount. Gross income has to be divided into taxable and non-taxable categories. The explanation of what is and is not considered taxable income can be found following this link.

Determining Combined Income for NJ Child Support

Once the gross income for both parents has been established, deductions such as taxes, pension contributions, and union dues determine the parents’ combined income. Child Support Guidelines give a specific amount based on that figure and the number of children in the family. According to parenting time, the court will assign the financial obligation for each parent, also considering healthcare costs, educational expenses, and living costs.

Tax Implications When Paying Child Support

Neither the amount of child support paid or received is taxable nor tax deductible. It is customary for parents to claim a child on their taxes for a deduction. Some parents agree to alternate years, while others have an even number of children, each claiming an equal number. If a parent owes arrears in child support, their tax refund can be taken to pay for the back child support.

Claiming Dependents and NJ IRS Guidelines

Paying or receiving child support has a null effect on the parents’ taxes. However, a parent may claim a child as a dependent for tax purposes. Typically, parents will agree by alternating years or dividing the children between them in an informal manner for tax purposes. However, the IRS says the parent who provides more than half of the support in a year can claim the dependency exemption. This rule applies when a parent has custody of a child for more than half a year; the parents have lived apart for at least the last six months of the year, have a written separation agreement, or have paid more than half of the child’s support for the year.

Effective Strategies for Parents to Prevent Child Support Tax Challenges

If you and your soon-to-be ex are on speaking terms, you can save a lot of money and grey hairs by agreeing on an amount for child support that is fair to you both and the children. Discuss the possible exemptions and decide how you will handle them. A judge will still have to approve your agreement, making sure it meets the child support guidelines, but the whole process is much smoother when everyone has the same mission.

Keep your finances organized. Itemize receipts, download bank statements, and pay stubs. Be prepared to show exactly what you make and how it is spent. Monitor spending in all categories, especially expenditures regarding your children. Pay your support on time. Your tax refund can be taken to pay your arrears. Your driver’s license and passport may also be affected. If there is a situation where you cannot pay because of illness or because you are unemployed, don’t ignore the problem. Seek the help of the courts as soon as possible.

Contact Bronzino Law Firm Today to Secure Your Peace of Mind and Financial Stability

Knowing how the tax panorama will change for you and your ex is important. By having someone who can explain the complexities of the tax laws in relation to child support, you can ensure a fair decision of support for everyone involved. Our seasoned attorneys at Bronzino Law Firm can provide the information and guidance you require during this stressful time in Point Pleasant, Berkeley, Holmdel, Brick, Bay Head, Ship Bottom, Toms River, and neighboring communities. Through proactive decision-making and careful planning, we can provide you with the solutions you need. By analyzing the specifics of your situation in combination with all relevant tax considerations, we can customize a strategy for you. Call today for a free consultation at (732) 812-3102 or contact us online.