Questions frequently arise in the case of divorced parents regarding who can claim certain tax benefits related to their children. Generally, only one person may claim all the child-related tax benefits for a child, including the dependency exemption, the child tax credit, the dependent care credit, the exclusion for dependent care benefits and head of household filing status.
The exception is the special rule for divorced or separated parents or parents who live apart for the last 6 months of the calendar year. Under this special rule, the noncustodial parent may claim the dependency exemption for a child if the custodial parent releases the exemption. Also, the noncustodial parent may claim the child tax credit if the other requirements for the child tax credit are met.
Conversely, only the custodial parent may claim the dependent care credit. Usually, only the custodial parent may claim the Earned Income Tax Credit (EITC), because the child must meet the residency test for qualifying child, that is, the child must live with the parent for more than six months of the year except for temporary absences.
Generally, custody is determined by the number of nights the child slept in the home of the parent or the parent had responsibility for the child for the night. Consult Publication 501, Exemptions, Standard Deduction, and Filing Information for more details and exceptions such as temporary absences.
Here are the rules for divorced parents as stated in Publication 596:
A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EITC) if all of the following apply:
- Are divorced or legally separated under a decree of divorce or separate maintenance,
- Are separated under a written separation agreement, or
- Lived apart at all times during the last 6 months of the year, whether or not they are or were married.
- The child received over half of his or her support for the year from the parents.
- The child is in the custody of one or both parents for more than half of the year.
- Either of the following statements is true.
For all divorces final after December 31, 2008, the IRS is no longer accepting a copy of a divorce decree to show who has the right to claim the dependency exemption. You must file Form 8332 or a substantially similar statement with the return or, if you file electronically, with Form 8453. The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return.
If the divorce decree was dated before January 1, 2009, the IRS may accept certain pages of the divorce decree as a substitute for a Form 8332, if the decree unconditionally provides that the noncustodial parent may take the exemption for a child, the custodial parent signs the decree, and the decree otherwise conforms to the substance of Form 8332.
A married taxpayer can be considered unmarried and file as Head of Household if all the following tests are met:
- Must file a separate return.
- Must have provided more than fifty percent of the cost of maintaining a home.
- Must not live in the same home as the spouse at any time during the last six months of the year.
- The home was the main home of a qualifying child for more than half the year.
- Must be able to claim an exemption for the child. However, the taxpayer may meet this test if they are not claiming the exemption for the child because they released the exemption to the other parent under the special rule for divorced or separated parents discussed above.
If you have any questions regarding the correct tax treatment of child related tax benefits, contact Steve Siesser at firstname.lastname@example.org for immediate assistance.