Child support payments are not tax deductible by the payer and are not taxable income to the recipient. Paying child support does not necessarily entitle you to claim the child as a dependent for tax purposes (a dependency exemption). 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 Jersey, as in all states, child support payments are governed by federal tax law, which stipulates that these payments are neither deductible by the payer nor considered taxable income for the recipient. This means that the parent who makes child support payments cannot reduce their taxable income by the amount of child support paid, and the parent who receives child support does not have to report it as income. When it comes to claiming a child as a dependent for tax purposes, the IRS rules are clear: the custodial parent, defined as the parent with whom the child spent the most nights during the tax year, is typically entitled to the dependency exemption. If the child's time is split equally between parents, the parent with the higher adjusted gross income (AGI) is generally given the right to claim the child as a dependent. However, it is possible for the custodial parent to waive this right, allowing the non-custodial parent to claim the exemption, which can be arranged through a court order or mutual agreement, often documented on IRS Form 8332. In some cases, a child custody court may order parents to alternate the years in which they claim the child as a dependent, which should be adhered to in accordance with the court's decision and IRS regulations.