Does Child Support Count as Income When Buying a Home?

When it comes to matters of money in a divorce, emotions often run high. When children are factored in, it can get complicated quickly. If you’re responsible for paying child support each month, it can feel like you’re paying too much. If you’re the custodial parent, that monthly income may not seem like enough to cover the expenses incurred. Knowing if you can count child support as income can help clarify the situation when it is time to file taxes or apply for loans.

Child Support Laws in Arkansas

Child support laws have changed as recently as this year. In 2020, the Arkansas Supreme Court shifted the child support law to include an assessment of both parents’ incomes when determining the amount of support paid to the custodial parent. Previously, the court only considered the net earnings of the non-custodial parent when setting child support. This new law aligns Arkansas with a majority of the states, which now consider both incomes when determining child support. It does lead to a little confusion over whether to count child support as taxable income.

Can I Count Child Support as Income?

The IRS has two official answers to this question. They are “no” and “maybe.”

Dec. 31, 2018 is a pivotal date in this matter. For divorces before this date, child support payments were deductible for the payer (non-custodial parent) and taxable to the recipient (custodial parent). After this date the payments are not deductible for the payer and not taxable for the recipient.

Under both scenarios, someone paid taxes on the money used as child support. Theoretically, they are equal either way (assuming the judge took into consideration the tax liability of each party when determining the amount of child support.) However, due to the emotional nature of the subject, it may not seem equal.

If your divorce took place before 2019, the divorce document can be modified to adhere to the new regulations in Arkansas. Consult with an Arkansas family law attorney about requesting a modification for child support. A judge will consider the incomes of both parents in accordance with the new law and make adjustments to the child support payment as needed.

Child Support and Your Mortgage Loan

Although child support doesn’t generally count towards income on tax returns, when it comes to applying for a loan or mortgage, it is possible to use child support payments towards your total income.

When you apply for a mortgage loan, child support or alimony payments can be added to your earned income in some cases. You must be able to show documentation that payments have been received for six to 12 months prior to the loan application, and that they will continue for at least three years. The mortgage lender will also require court documentation supporting your claims. When you use child support or alimony as part of your income on a loan application, given the right conditions, it can potentially qualify you for a higher loan.

If you are not the custodial parent and are paying child support and applying for a loan, your child support payments do not disqualify you from applying. A mortgage lender will look at your total expenses compared to income to determine qualification. Child support will be considered an expense. As long as your debt-to-income ratio is low enough, you should be able to obtain a mortgage even with child support payments.

First Security Bank mortgage experts can help you know if your child support will count towards your loan and help you with the application process. Click here to find an expert near you.

*Neither the author nor First Security Bank are tax or legal advisors. You should consult tax or legal professionals about how this information applies to you specifically.

Meet the author

A little about Kimberly Mitchell

Kimberly S. Mitchell loves journeys, real or imagined. She has hiked the Inca Trail, walked into Panama on a rickety wooden bridge and once missed the last train of the night in Paris and walked several miles home (with friends). She believes magic can be found in life and books, loves to watch the stars appear, and still dreams of backpacking the world. Now she writes adventures to send her characters on journeys, too. Pen & Quin: International Agents of Intrigue – The Mystery of the Painted Book is her debut novel. Find out more at KSMitchell.com.