Is one obligated to give maaser from Kitzvat Yeladim monthly child payments received from National Insurance in Israel? In addition, how does this work if one owes them money and they are deducting from the Kitzvat Yeladim to clear the debt? Is this considered earned income as one is using it to pay back a debt?
As with all income, including gifts and stipends, one is obilgated to take maaser from NI payments. However, if a person is himself poor, the obligation of maaser does not apply.
If they deduct the payment from a debt, the payment would still be obligated in maaser.
Sources: For obligation on gifts, and for the exemption of the poor, see our shiur on the matter here.
Concerning the deduction of the payment from a debt: although Rav Nissim Karelitz is quoted (teshuvos at the end of Orach Tzedakah) as saying that the foregoing of a debt does not obligate the beneficiary in maaser, in this case, where the debt is not foregone but rather cancelled out against a payment, there would not appear to be room for special exemption.