Child Support should be taxable to the recipient and non-taxable to the payor as is alimony.
The reason for this is that much of the funds assocaited with Child Support are used for basic living expenses of the custodial parent, providing housing, transportation, cable, telephone, property taxes, etc. (Not trying argue this topic jsut stating the obvious) which all go to standard of living for the custodial parent. This results in the Non-Custodial parent paying in some cases 50% more in pre-tax dollars than the receipient is receiving.
Example: A divorced couple with three kids with support order and all amounts current have incomes as follows
Custodial Parent $43,500
Non Custodial Parent $94,200
Non Custodial Parent Child Support Obligation $1,755/mo
Taxes on the Child Support amount transferred to custodial parent are $842/mo. This means the Non-Custodial Parent is paying $842 in taxes every month above and beyond the Child support or in other words the total cost of child support to the non-custodial parent is $2,597/mo
If the CS was taxable by the Custodial parent the amount of taxes would be $210. Assuming that we want the custodial parent to still get the same amount after taxes this would mean the non-custodial parent would increase their payment to $1,965/mo.
for this example the offset provided by the court for taxes is $61 <-- from memory so might be way wrong.
I realize that this was process was developed long ago but in the age of computers this is all easily handled now and should be changed
