Some of the financial issues implicated by child custody arrangements and court orders are (1) child support payments; (2) payment for health insurance; and (3) the ability to claim the child or children as dependents for tax purposes. The Internal Revenue Service (IRS) rules dictate that the parent with whom the child spent the most nights during the tax year has the right to claim the child as a dependent. And if the child spends an equal number of nights with each parent during the tax year, the parent with the higher adjusted gross income (AGI) has the right to claim the child as a dependent. Sometimes the child custody court will order the parents to alternate years of claiming the child as a dependent.

In New Mexico, as in other states, child custody arrangements and court orders can significantly impact financial responsibilities. Child support payments are determined based on guidelines that consider the income of both parents and the needs of the child. The non-custodial parent typically pays child support to the custodial parent to cover the child's living expenses. Additionally, the court may order one or both parents to provide health insurance for the child. If the cost of health insurance is not already accounted for in the child support calculation, it can be added as an additional expense. Regarding tax implications, the IRS rules state that the custodial parent, defined as the parent with whom the child spent the most nights during the tax year, generally has the right to claim the child as a dependent. If the child spends an equal number of nights with each parent, the parent with the higher AGI is entitled to the tax exemption. However, New Mexico courts can order parents to alternate the years they claim the child as a dependent, which overrides the IRS rule. This is often included in the custody agreement or court order and requires the custodial parent to sign IRS Form 8332 to release the exemption to the non-custodial parent.