By Jennifer M. Paine
The IRS can treat payments as child support despite what you call it if the payments are paid out as child support would be – during the child’s minority, in amounts that fluctuate with fluctuating income, childcare needs, etc., and so forth.
However, you might be paying expenses for your children that are deductible.
These include qualifying childcare expenses and certain healthcare expenses for minors, and college tuition and school expenses for adults. Two federal options, which are not often discussed but could be helpful, allow you to deduct up to $8,500 total – the Tuition and Fees Deduction and the American Opportunity Tax Credit.
The Tuition and Fees Deduction allows you to deduct payments you made for yourself or your dependent for tuition and fees that are a condition of enrollment. The total deduction is $4,000 annually for a single filer with an income up to $65,000 ($130,000 for joint filers), $2,000 for a single filer with an income between $65,000 and $80,000 ($130,000 and $160,000 for joint filers), and nothing for those with an income greater than $80,000 (or $160,000 for joint filers). This is one reason to file a joint return if you were not divorced in 2011.
The American Opportunity Tax Credit is a refundable credit for qualifying undergraduate expenses, such as tuition, books and school supplies. The credit is phased-out for those payors earning more than $80,000, if filing single, or $160,000, if filing joint, but the payor can claim his own expenses or his dependent’s, such as his child’s.
The credit is $1,000 of the first $2,000 in expenses paid, and then an additional 25% of the following $2,000, for a total of $2,500 as a potential credit. However, up to 40% of the entire $4,000 is refundable, too – that is, $1,000 more coming back to you!
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Note: This information is general in nature and should not be construed as tax advice. You should work with your attorney or tax professional to determine the tax advantages that will work best for your situation.
Jennifer M. Paine is a Michigan Divorce Lawyer with Cordell & Cordell. She is licensed to practice in Michigan, and has been admitted pro hac vice in Illinois, Ohio, and the United States Court of Federal Claims.
Ms. Paine received her BA in English and Mathematics from Albion College and graduated Summa Cum Laude. She received her Juris Doctorate from MSU College of Law and graduated Summa Cum Laude.