For all agreements or court orders after May 1997, child support payments are not taxable to the recipient or deductible by the payor. For income tax purposes, any support stipulated in an agreement or court order is deemed to be child support if it is not identified as spousal support.
Complications can arise when support payments are in arrears. All arrears payments are deemed to be child support payments until child support is up to date. Subsequent payments are considered to be spousal support payments that are taxable to the recipient and deductible to the payor.
Example: Martin lost his job during the tax year and was not able to keep up with his required support payments. He was required to pay $500 per month in spousal support and $1,000 per month in child support. For the year, he paid $15,000. For income tax purposes, this is deemed to be $12,000 child support (the required amount) and $3,000 spousal support. Martin may deduct only $3,000 of the $15,000 paid and his ex-wife is only required to report $3,000 as income from spousal support.