Divorce can bring about numerous changes, not only in personal lives but also in financial responsibilities and benefits. One key issue that often arises is determining who can claim the children for tax purposes after a divorce. This decision can significantly impact the tax liabilities and benefits of both parents, making it essential to understand the rules and guidelines set by the IRS.

Understanding the Basics

When parents divorce, one of the main tax considerations is the dependency exemption, which allows the claiming parent to receive tax benefits. These benefits can include the Child Tax Credit, the Earned Income Tax Credit (EITC), if you qualify, and deductions for childcare expenses, among others. Generally, the IRS considers the custodial parent as the one who is eligible to claim the children. However, there are specific situations where this can change.

The Custodial Parent

According to the IRS, the custodial parent is the one with whom the child lived for the greater number of nights during the tax year. In Georgia, this generally means the parent with whom the child lives more than 50 percent of the time. This parent is typically entitled to claim the child as a dependent. If the custody arrangement is such that the child spends an equal amount of time with both parents, the IRS uses tie-breaking rules, often looking at which parent has the higher adjusted gross income.

Special Situations: Custodial Parent's Release of Claim

There are circumstances where the custodial parent can release the right to claim the child as a dependent to the non-custodial parent. This can be done by completing IRS Form 8332, "Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent." The non-custodial parent must attach this form to their tax return to claim the child.

For the non-custodial parent to claim the child, the custodial parent must agree and sign the release form for each year the non-custodial parent claims the child. This arrangement is often part of the divorce agreement or court order.

Child Tax Credit and Other Benefits

Claiming a child as a dependent can provide significant tax benefits. The Child Tax Credit, for instance, allows the claiming parent to receive up to $2,000 per qualifying child under 17. Additionally, the claiming parent may also qualify for the Child and Dependent Care Credit if they pay for childcare to enable them to work or look for work.

The Earned Income Tax Credit (EITC) is another substantial benefit, particularly for lower-income parents. However, it's important to note that even if the non-custodial parent claims the child as a dependent, only the custodial parent can claim the EITC.

Agreements and Legal Orders

In many cases, the decision about who will claim the child for tax purposes is outlined in the divorce decree or custody agreement. These legal documents should be clear about which parent claims the child in any given year. Sometimes, parents may alternate years or claim different children if they have more than one.

Resolving Disputes

Disputes about who can claim the child are not uncommon. To avoid issues, it's crucial for parents to communicate and adhere to the terms of their divorce or custody agreement. In the event of a disagreement, it's advisable to consult with a tax professional or family law attorney to understand the best course of action based on the specific circumstances.

Final Thoughts

Determining who can claim children for tax purposes following a divorce involves understanding IRS rules, the specifics of custody arrangements, and any legal agreements in place. By clearly defining these roles and adhering to the guidelines, both parents can navigate their tax responsibilities and benefits more effectively. If there is any confusion or potential conflict, seeking professional advice can help ensure that both parents comply with tax laws and maximize their benefits.

At Shakhan & Wilkerson Law we help custodial and non-custodial parents determine what course of action is best to follow in custody fights.