With tax season fast approaching, separated or divorced parents must determine which one of them is eligible to claim their child or children as dependents for income tax purposes. This issue can often be a sensitive subject, as the parent who would benefit most from the preferred tax filing status may be unable to claim the child without the cooperation of their former partner.
The Internal Revenue Service (IRS) has specific rules governing dependency, and understanding them can help parents avoid disputes and maximize tax benefits. Generally, the custodial parent has the right to claim the child as a dependent on their federal income tax return. The IRS defines the custodial parent as the one with whom the child resides for the greater number of nights during the tax year. Even if the parents share custody “equally,” pursuant to a Custody Agreement or Order of Court, the one with more overnight custody will be considered the custodial parent for tax purposes.
Yes, the non-custodial parent can claim the child as a dependent, but only if the custodial parent provides consent. The custodial parent must submit a formal written declaration using IRS Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. This form allows the custodial parent to transfer the dependency exemption to the non-custodial parent for a single year or multiple years. The non-custodial parent then attaches this form to their tax return when filing. Without this form, the IRS will default to awarding the dependency exemption to the custodial parent. Depending on the parents’ respective incomes, choosing to submit this declaration may minimize their combined tax liability.
Claiming a child as a dependent can provide significant tax benefits, including eligibility for the Child Tax Credit and other deductions. If parents are not aligned as to who should claim the child in a given tax year and both attempt to take the dependency exemption, it may result in the IRS auditing the non-custodial parent or both parents.
The dependency exemption issue can become even more complicated when there are multiple children to the relationship or when the parents are separated, but not yet divorced by the end of a given tax year. It is therefore crucial for parents to consult with a family law attorney and tax professional to determine how to navigate dependency claims during the pendency of a divorce as well as in the Order or Settlement Agreement that dictates how the dependency exemption will be applied until the child is no longer eligible to be claimed as a dependent.
If you are in the midst of a divorce or custody dispute and have questions about your situation, consulting with one of our experienced family law attorneys can help ensure compliance with IRS rules and maximize your tax advantages.
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.
Matthew concentrates his practice exclusively on family law. He handles all aspects of negotiation and litigation in high-asset, complex domestic relations matters including divorce, equitable distribution, child custody, alimony/spousal support, pre-nuptial and...
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