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Dependency Exemptions for Children of Divorced Parents

By Thomas Van Blunk and Jaclyn Martello

Claiming your children as dependents as a divorced couple can be complex, since you are more than likely to file two separate tax returns. In this blog, we will review some exceptions for dependents of divorced parents and rules outlined by the IRS. 

Only one parent can claim a child as a dependent in a tax year; divorced parents cannot both claim the same child as a dependent in a tax year. The custodial parent will generally claim the qualifying children as dependents on their return. However, some custodial agreements allow for yearly alternated claiming of children. According to the IRS, these common factors allow a custodial parent to claim a child as a dependent:

  • The parent that the child spends the most nights with during the year is the custodial parent. The other parent is the noncustodial parent.
  • The custodial parent typically claims the child on their tax return based on the residency test which states that the child must live with you for more than half of the tax year.
  • The parent with the higher adjusted gross income is the custodial parent if the child spent an equal number of nights with each parent over the course of the tax year.

There are tie-breaker rules if a child can be a qualifying child for both parents. Although a child may meet the requirements to be a qualifying child of both parents, only one of the parents can claim the child as a dependent. Please go to the IRS website for more information about tie-breaker rules. 

In some cases, non-custodial parents may be able to claim a qualifying child if the custodial parent releases the dependency exemption for a given year. The custodial parent must fill out Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, and then give the signed form to the non-custodial parent to submit with their tax return. It’s important for parents to have clear communication regarding claiming a child and the resulting exemptions. 

There are various credits and deductions that you may be able to qualify for when claiming a child as a dependent according to the IRS:

• Child Tax Credit (CTC)– provides tax credits for individuals who claim a child as a dependent, if the child meets certain conditions

• Additional Child Tax Credit (ACTC)– provides additional tax credits for individuals with qualifying dependents; you can claim the ACTC if you claim the CTC, but you cannot take the ACTC if you are only claiming the Credit for Other Dependents (ODC).

• Earned Income Tax Credit (EITC)– helps families and workers with low to moderate incomes to receive a tax benefit; if eligible, the credit can be used to lower your tax liability and possibly increase your tax refund.

•  Child and Dependent Care Credit– You may be entitled to claim this credit for child and dependent care expenses if you hired someone to look after your child or another qualifying dependent so that you (and your spouse if filing jointly) could work or look for a job. By including the Credit for Child and Dependent Care Expenses on your tax return, you may be able to lower your federal income tax.

• Education credits– assist with the cost of higher education by lowering the amount of tax due on your tax return; you can receive a refund (up to $1,000) if the credit lowers your tax to less than zero.

• Medical expense deductions– You may qualify for this deduction if you have expenses associated with cure, diagnosis, mitigation, prevention, or treatment of a disease. Payments for legitimate medical services provided by doctors, surgeons, dentists, and other medical professionals are also included within these costs; they cover the price of the tools, materials, and diagnostic equipment required for these objectives.

Note that all the above credits have their own rules and qualifications,  check the IRS website for the specific requirements. Also, refer to your local state websites for any additional credits and deductions.

This information has been prepared for informational purposes only, and is not intended to provide, and should not be relied upon for tax, legal, or accounting advice. If you have any questions regarding dependency exemptions, please do not hesitate to contact us at Lear & Pannepacker.