Post-Divorce: Who Deducts the Children?

Once you are divorced, you will be met with new divorce-related tax issues. For example, spousal support will be tax deductible for the paying spouse and it will be counted as taxable income for the receiving spouse. But there are also the child-related tax deductions.

Usually, but not 100% of the time, the parent who has the child more days out of the year is the one who gets the child-related tax breaks. For tax purposes, the Internal Revenue Service (IRS) is interested in knowing which parent has custody of the child for more days out of the year.

The parent who has the child more often is called the custodial parent, while the other parent is referred to as the noncustodial parent. As a rule of thumb, the custodial parent is the only one who claims the child as a dependent on their taxes each year, however, the law allows the custodial parent to release their right to claim the child as a dependent to the noncustodial parent if they so please.

If a custodial parent relinquishes their right to claim their child as a dependent, it can translate to major tax savings for the noncustodial parent, especially if they have multiple children. The requirements for a noncustodial parent to take the child-related tax breaks, include:

  • More than half of the child’s support for any given tax year was provided by at least one of the parents.
  • The parents are divorced or legally separated by the end of the year, or they lived apart for the latter half of the year.
  • The child was in custody of one or both of their parents for more than six months of the year.
  • The custodial parent signs a written declaration, which allows the noncustodial parent to claim the child as a dependent for that year.

Additional Tax Breaks Available

Once all of the above requirements are met, the noncustodial parent is entitled to further tax breaks providing the child is eligible.

Such tax breaks include the dependency exemption deduction ($4,050 for 2016), the child tax credit, higher education tax credits, and the student loan interest deduction, etc. Some breaks are available to both parents, and some are only provided for the custodial parent.

If you are looking for a divorce attorney to explain the tax implications of divorce, contact Claery & Hammond, LLPtoday!