You have the choice of filing jointly or married separetly while your divorce is pending. Whether for emotional or financial reasons, couples often choose to file separately.
But for couples with children, who gets to claim the kids on taxes?
Index for Quick Jump
- 1 Who Gets to Claim the Children as Exemptions?
- 2 So how does the IRS decide who claims the children while a divorce is pending?
- 3 The IRS’s “Tiebreaker” Test
- 4 The Credit When the Parties “Agree”
- 5 How does the IRS determine who the custodial and noncustodial parents are?
- 6 What if the parties separate prior to August?
- 7 What happens if my spouse claims the children even if the children did not live with him/her a majority of the year?
- 8 Besides the Dependency Exemption Are Their Any Other Child Tax Credits and Benefits
- 9 What happens if I was not married to the Mother/Father of my child?
Who Gets to Claim the Children as Exemptions?
In a perfect world. your divorce lawyer and your spouses divorce lawyer will work this out for you in advance of tax season.
If they do not, then tax law becomes controlling. We have to look at the IRS’s publication on the matter.
So how does the IRS decide who claims the children while a divorce is pending?
The IRS looks at whether or not a child is a qualified child. To do this the IRS looks at five tests:
- Relationship: the child must be your son, daughter, step child etc.
- Age: the child must be under the age of 19 at the end of the year and younger than you; a student under age 24; or permanently disabled.
- Residency: your child must have lived with you for more than half the year. (Special exceptions for divorced and legally separated parents.)
- Support: the child cannot have provided more than half his or her own support for the year.
- Joint Return: the child cannot file a joint return for the year (i.e. with her Husband).
Therfore, in a common situation with a dependent child the credit goes to the parent with home the child has resided more than half of the year.
However, there are some cases where both parents meet the qualifying criteria in order for the IRS to consider the child a “qualified child.”
After all the chances are good that both of you lived together with a child for a substantial portion of last year.
The IRS’s “Tiebreaker” Test
If that is the case the IRS specified certain tiebreaker rules. To determine which parent can treat the child as a “qualifying child” to claim as an exemption the following rules apply:
- The parents can file a joint return, and thus both would claim the qualifying child.
- If the parents do not file a joint return, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year.
The Credit When the Parties “Agree”
One party can also let the other party claim the child as a qualifying child for the dependency exemption, child tax credit and exclusion for dependent care benefits.
However, just because you agree to claim the child as an exemption does not mean you would necessarily qualify for the Head of Household status, earned income credit, or the credit for child care expenses.
In order to voluntarily allow one parent to claim the child as an exemption for tax purposes the allowing parent would need to fill out Form 8332 which releases the custodial parent’s claim to an exemption for a child. This form must be attached to the claiming parents return.
How does the IRS determine who the custodial and noncustodial parents are?
The custodial parent is the parent with whom the child lived for the greater number of nights during the year. The other parent is the noncustodial parent.
When the parents separate during the year, the custodial parent becomes the parent with whom the child lived for the greater number of nights during the rest of the year.
What if the parties separate prior to August?
If the parents separate prior to August then it is likely that the children did not live with one parent for more than six months out of the year. Thus, that parent would not meet the residency requirement of the IRS’s qualifying child test.
If this is the case then the parent who has the children would be the only one entitled to claim the minor children, and the tiebreaker rules would not need to be applied.
What happens if my spouse claims the children even if the children did not live with him/her a majority of the year?
If both parties try to file the same children as exemptions the Internal Revenue Service (IRS) usually will kick back the return for whichever party filed second.
It would then be the responsibility for the party who filed second to contest the issue with the IRS. Thus, it is usually easier to be the first to file in this case, because you would be the one less likely to have to fight the issue.
However, if you are the first to file and the IRS looks into the claim and discovers you should not have been the one to claim the exemption the IRS can assess you a penalty.
Besides the Dependency Exemption Are Their Any Other Child Tax Credits and Benefits
We have focused on the dependency exemption because it is the most valuable. But their are other exemptions and credits that can make a big difference to your bottom line, including:
- The child tax credit.
- Head of Household filing status.
- The credit for child and dependent care expenses.
- The exclusion from income for dependent care benefits.
- The earned income credit.