Divorce brings with it a long list of important decisions that need to be made, and taxes are one of those things that often get overlooked—that is, until April rolls around and both parents wonder: Who gets to claim the kids?
This is a fair question, and one that can have a big impact on your refund or tax bill.
Here is a simple and straightforward breakdown.
The IRS Rule: Only One Parent Can Claim Your Kids on Taxes
The IRS allows only one parent to claim each child as a dependent in a given tax year. This is true even if you share 50/50 custody. If both parents attempt to claim the same child, it can delay refunds and potentially trigger audits, which is not exactly what anyone wants.
The next question is, who should claim the kids for tax purposes come tax time? In most cases, the parent the child lives with for the majority of the year—the custodial parent—should claim the child. So, even if it feels like you are splitting time evenly, the parent who had one more night with the child is generally considered the custodial parent by IRS standards. That parent typically gets to claim:
- The child as a dependent
- Head of household filing status
- The child tax credit
- The earned income credit (if eligible)
- The child and dependent care credit
You Can Agree To Do Things Differently
Here is where flexibility comes into play: parents can choose who gets to claim the kids, regardless of who has the kids the majority of overnight stays during the year. Some parents may even choose to alternate years, especially in situations involving true joint custody.
That said, this should be specifically outlined in the divorce decree or custody arrangement. To make this official, the custodial parent needs to sign IRS Form 8332, releasing their claim to the exemption for that year.
The non-custodial parent then attaches that form to their return.
Why does this matter? Claiming a child can result in significant tax benefits, so it is not something to gloss over. If one parent earns significantly more than the other, the tax impact of claiming a child might be more valuable on their return. That is why it is often negotiated during divorce or modified over time as financial situations change.
If the divorce decree does not specify these details, and both parents believe they are entitled to claim the child, the IRS will apply a set of tie-breaker rules, which usually favor the custodial parent.
But that is not ideal. It is always better to clarify and agree on things ahead of time rather than let the IRS settle it.
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