Remarriage with Children: Income Tax Considerations

Alimony payments:

Marrying someone with children from a prior relationship can create a variety of income tax questions. Here are some points to consider.

.   Usually must be included in the gross income of the recipient

.   Can be deducted by the payer (if all requirements are met)

.   The divorce agreement may designate alimony as nontaxable and nondeductible

Child support payments:

.   Ordinarily considered nontaxable income of the recipient

.   Are not deductible by the payer

Dependency exemptions:

.   Ordinarily, the custodial parent is entitled to claim the exemption, regardless of who
     pays child support

.   The noncustodial parent can claim the exemption if the custodial parent agrees in
     writing or it's part of the divorce agreement; IRS Form 8332 should be used by
     separated or divorced parents and attached to the noncustodial parent's tax return

Child support payments:

.   Custody of the child isn't required

.   Claiming the child as a dependent isn't required (although you must be eligible to
     claim the child as a dependent)

.   Medical expenses are only deductible to the extent they exceed 7.5 percent of
     adjusted gross income on the tax return

Child and dependent care credit:

.   Can only be claimed by the custodial parent

.   Must be for child-care expenses incurred so you can work

.   Can claim, if qualified, even if you're not claiming the child as a dependent

.   Child (and additional child) tax credit:

.   Can claim, if qualified, for a child you claim as a dependent

.   Custody of the child isn't required

.   Education credits (Hope credit, Lifetime Learning credit):

.   You must be claiming the child as a dependent

.   You must have paid qualified tuition and/or related expenses

.   Child must be a qualified post-secondary school student (Hope credit only)