Custody Determination: Who Gets the Dependency Exemption and Child Tax Credit?

A “custodial parent” for taxes is the parent the child lived with most of the time. If they spent an equal amount of time with each parent, the one with more money is the “custodial parent”. If a child of divorced parents spends more than half the year with one parent, that parent is considered the custodial parent for tax purposes. If the child spends an equal number of nights with each parent, the parent with the higher income is considered the custodial parent. If the custodial parent is temporarily absent, the child is still considered to be residing with that parent. For example, if a parent is away on military service, the child is still considered to be with that parent for tax purposes. If a parent works at night and the child stays with them more days in a year, that parent is considered the custodial parent. Once a child turns 19, neither parent has custody for tax purposes. If the child is a full-time student under 24, the parent who provides more than half of their support can claim them as a dependent. The custodial parent can give the noncustodial parent the right to claim tax benefits by signing IRS Form 8332. The form has to be filled out properly for it to count. The number of nights a parent spends with their child determines who gets the tax deduction, regardless of what the custody arrangement says in a Florida court order. In one case, the mom got the deduction because she proved she had the kids for more nights, even though the dad had more custody time in their divorce decree. She showed her custody days in a planner and the court said she did a good job of keeping track. The court suggested using IRS Form 8332 to avoid disagreements about custody. So, it’s important to keep good records of the nights the kids spend with each parent, and it’s a good idea to use Form 8332. A married couple got divorced in Utah and the court gave custody of their two children to both parents. The court also said that the husband could “buy” the right to claim one of the children on his taxes from the wife, by paying her the difference in their taxes. But the husband didn’t fill out the right form for it, so he couldn’t claim the child on his taxes. Even though the divorce court said he could, the tax court said that doesn’t matter for taxes. The wife had already claimed the child on her taxes, so she couldn’t give the right to the husband anymore. If the wife didn’t follow the divorce agreement, the husband would have to deal with it in the divorce court, not with taxes. If a parent who released their right to claim a child for taxes wants to change their mind, they can do so by sending a written notice to the other parent. This notice has to be provided to the other parent and attached to the tax return. It can only take effect for future tax years, and the parent has to make an effort to let the other parent know about the change. If there’s a court order or divorce agreement about the tax exemption, the court has to be asked for permission to make the change. When a parent makes a certain amount of money, they can’t claim their kids as dependents on their taxes anymore. A court can’t treat the right to claim kids as dependents as property that can be divided in a divorce. The child support amount might include the right to claim the kids, but it can be changed later if needed. The Child Tax Credit is a benefit for parents with children that helps reduce their tax liability. It’s $1,000 for each child under 17. The credit starts to decrease for higher income levels. Only the parent who can claim the dependency exemption can also claim the Child Tax Credit. If a parent has three or more qualifying children, they may get additional benefits. The Child Tax Credit doesn’t increase with inflation, but the income levels for phase out do. These are sections of the tax code that deal with rules for claiming dependent children on tax returns. They include regulations on who can claim the dependency exemption and the child tax credit. It also discusses how to resolve disputes between parents over who can claim the exemption. The purpose of these rules is to help families with the cost of raising children and to recognize the financial responsibilities of having dependents. A “qualifying child” for tax purposes is someone who fits certain criteria, such as being a son, daughter, stepchild, or foster child of the taxpayer. The Working Families Tax Reform Act of 2004 made changes to tax laws. The Modified adjusted gross income is the regular adjusted gross income plus certain exclusions. The phase out thresholds for the dependency exemption change each year based on inflation. Melvyn B. Frumkes is a lawyer who specializes in family law and tax issues related to divorce. This information is provided by the Family Law Section.

Source: https://www.floridabar.org/the-florida-bar-journal/custody-determination-who-gets-the-dependency-exemption-and-child-tax-credit/