Getting a divorce involves many decisions, some of them with long-term consequences. Your divorce decree may spell out how your assets and debts are going to be divided, whether or not there will be spousal support and for what amount, and how the custody of the children will be divided. However, these decisions may also impact your tax liability going forward. For questions in this regard, you should consider speaking with a Phoenix child custody attorney who can clear up any doubts and explain how to file your taxes from now on as far as child custody is concerned. For the moment, read on to find out more about claiming a child in cases where there is 50/50 custody.
Who Can Claim a Child as a Dependent?
Regardless of whether there is a divorce in the picture or not, the IRS has established guidelines that determine how to treat a child in your tax return. This qualifying test establishes that the child must be younger than 19, or 24 or younger when they are a student. There is no age limit imposed when the child is totally or permanently disabled.
You may also claim a qualifying relative on your tax return providing that they are US citizens, live with you the entire year, and you must have provided more than half of their total support for the year. In any case, only one taxpayer can claim a child or qualifying relative as their dependent in their returns.
When there is a divorce involved, only one of the parents can claim the child in their tax return. This means that they can either agree as to who will claim the child or they must follow the IRS tiebreaker rules to decide who will be claiming the child in their tax returns.
Who Claims a Child on Taxes When There Is 50/50 Custody?
It is usually the custodial parent who may claim a child as a dependent for tax purposes. The custodial parent is the one who has physical custody of the child for most of the year. This would be easy if the child lives with one parent year-round but that is not always the case.
When the parents have 50/50 custody of the child, the IRS uses the tiebreaker rule. This states that the parent who claims the child is the one who has the child longer. If the child spends their time equally with both their parents, this would make the parent where the child spends 183 days and nights per year the one who claims the child in their tax return.
There may be cases where the child spends precisely 50% of each year with each parent. When this happens, the IRS allows the parent with the highest adjusted gross income to have precedence. Using this method, may result in the child being claimed as a dependent by a different parent every year, depending on how their income is changing.
Is There Anything That Parents Can Do?
In cases in which the parents share equal custody, they also have the option to decide who claims the child on their tax return. They may decide to alternate years or, if there are 2 children, they may opt for claiming one child each. If the parents can agree in this regard, their decision can be included in their divorce decree.
The parents may also decide that the one that makes the most money will claim the child, particularly if this is the parent who will be paying the majority of the child’s living expenses including their extracurricular activities or medical care and expenses.
If you are a custodial parent but would like to release the right to claim your child as a dependent, you should file form 8332, which is called Release or Revocation of Release of Claim to Exemption for Child by Custodial Parent. After completing this form, the non-custodial parent will be able to claim the child as a dependent and as a qualifying child for the child tax credit. However, this does not allow them to claim head of household status nor can they take the earned income credit or other tax credits that are child-related.
Is There a Problem If Both Parents Claim the Same Child as a Dependent on Their Taxes?
The parents might be unable to agree on who will claim their child as their dependent on their taxes and file their returns with this deduction without informing their ex-spouses. When this happens, the IRS will reject one or both of them. If the returns are electronically filed, this happens automatically. You would then receive a notice from the IRS letting you know that your return has been flagged.
At this point, the parents will have no other option but to resubmit their amended returns to fix the error. When this is not done or it is not done promptly, you risk the IRS auditing both your and your ex-spouse’s tax returns. After that, the IRS tiebreaker rules will be used to determine who gets to claim the child as their dependent in subsequent years.
It is not worth it for you to get an audit by the IRS over this matter. It can not only be annoying and time-consuming; it can be nerve-wracking. If despite your best efforts you and your ex-spouse are unable to reach an agreement as to who will be claiming the child as their dependent for tax purposes, it is recommended that you reach out to your divorce attorney or financial advisor and request guidance on the subject.
You should be aware of the rules imposed by the IRS when it comes to claiming a child as your dependent when you share equal custody with your ex-spouse. It will keep you on the right side of the law and prevent you from having to undergo an audit. Also, talk to your financial advisor to understand the implications of this tax deduction.