Last Updated: July 2023 

The “tax offset option,” authorized through the Deficit Reduction Act of 2005, is when states elect to give families who are owed child support any support that the IRS deducts from a non-custodial parent’s tax refund for past-due child support. Only five states — Alaska, California, Pennsylvania, Vermont, and West Virginia — have elected to use this option. If states don’t elect this option, the funds that are deducted are split between the federal and state government as repayment for previous TANF cash payments paid to the family. 

Advocates should urge their states to enact the tax offset option to direct support to families in need.  Child support payments can be a significant source of family income that helps families cover essentials like food, school supplies, and children’s clothing. Additionally, when states keep child support, noncustodial parents are less likely to follow through with their child support orders, which may result in non-payment and debt, pushing families deeper into poverty. Finally, policies that withhold child support also disproportionately harm families of color. Key Resources: 

States Should Take Steps Needed to Direct Child Support Payments Deducted From Tax Refunds to Children: This CBPP report explains the nuances within the tax offset option, including the different mechanisms for former versus current TANF recipients. It also outlines the positive impacts of enacting the tax offset option, including some details that were specific to pandemic-era contexts.  

Child Support Distribution (aspeninstitute.org): Page 6 of this report by the Aspen Institute explains the basic mechanisms behind child support distribution, which situates the tax offset option within a larger context of the child support system. It specifically explains the differences between PWORA and DRA distribution. It also describes how CARES Act payments were affected.