Court rules that Income Tax must not fall upon child support

STF ruled that there must be no taxation on income earned by child support in Income Tax (IR).

With this decision, divorced mothers with custody of children who receive child support do not need to include such income in their tax return.

Justice Dias Toffoli, reporting judge on the case, claimed that child support does not entail a new source of income or increase in property.

“Securing minimum living conditions for financial dependents with earnings taxed when added to the non-custodial parent’s capital is income non-susceptible to another taxation, an actual double taxation”, mentioned Toffoli.

How did income tax use to levy upon child support sums?

Previously, IR used to levy upon child support sums at a rate that could go up to 25% of the income.

The payment of taxation on child support was carried out via monthly income tax payments (Carnê Leão), which was modified by the Supreme Court’s understanding.

With the decision, child support beneficiaries are exempt from monthly income tax payments, since it will no longer be required due to exclusion of the income in the Income tax return.

The term for the submission of the Income Tax Return ended on May 31, but the Federal Revenue Service initialized late returns.

Written by Marcos Ferreira, Content Assistant at Drummond Advisors