Parents working through a divorce have a lot to consider – custody arrangements, sharing child related costs, and even taxes. Parents will need to consider the specific rules that surround claiming a child for tax purposes. Doing so will help make filing taxes easier and will ensure there are no mistakes that cause fines, fees, or processing delays.
A dependent child must meet IRS qualifying child rules. Only one person can claim the child on their taxes, and divorced parents cannot split up tax benefits on their tax respective returns. If both parents claim the child, it will take time for the IRS to determine which parent’s claim takes priority.
The custodial parent is usually the one that claims the qualifying child on their return. This parent has primary responsibility for the child throughout the year and the child spends the majority of their time there.
If the child spends equal time between both parents, the parent that has the higher adjusted gross income is considered the custodial parent. It is very important to read Publication 504, Divorced or Separated Individuals, so parents can understand the details about who is eligible to claim a qualifying child.
There are some instances where a non-custodial parent can claim a qualifying child. In these cases, the custodial parent can provide a dependency exemption and sign a written declaration or Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent for the noncustodial parent to submit with their tax return.
This also applies to some tax benefits, including the child tax credit, additional child tax credit, and credit for other dependents. Keep in mind that this cannot be applied to other tax benefits, including the earned income credit, dependent care credit or head of household filing status.
Our experienced team at HomeWork Solutions can help provide information on tax benefits associated with in-home childcare for divorced parents. Contact us today at 1-800-626-4829 or info@homeworksolutions.com.