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Tax Talk with George Saenz

Ask the tax adviser

Child support and head-of-household tax status

Dear Tax Talk:
When filing as head of household, is child support considered for figuring out whether you pay more than 50 percent of household expenses? In other words, if my ex-husband pays me $1,200 a month in child support, do I deduct that amount from my monthly household expenses?
Jen

Dear Jen:
Frankly, your question on the surface looks simple, but I can see where the answer is not so clear. I found nothing in my research that indicates you need to deduct the amount of child support paid to you from the cost of your household expenses.

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In addition to meeting certain other tests to qualify for head-of-household status, you need to provide more than half of the cost of keeping up the household.

Internal Revenue Service Publication 501 provides a worksheet on page seven to determine if you paid half the cost of the household's upkeep. In completing the worksheet, it asks you to complete the amounts that you paid and compare that to amounts that you provided for these expenses.

In my opinion, if you earn money from sources other than child support you would count this towards the household expense test. For example, in completing the worksheet, if your total household expenses were $10,000 and you have income from sources other than child support of at least $5,001, then you would be considered as providing more than half of the costs of maintaining the home, which qualifies you to file as head of household.

Tax advantages of buying vs. renting

Dear Tax Talk:
What advantages are there in buying vs. renting if all your income is tax free?
Kimberly

Dear Kimberly:
From a tax standpoint, if all your income is tax-free there is no difference whether you buy or rent. The only tax advantage to owning a home is that the interest on the mortgage is tax deductible. But if you don't have any taxable income, then the deduction is meaningless, as you have no tax savings.

By the same token, if you only rent, you won't accumulate wealth through homeownership.

-- Posted: Aug. 28, 2001

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