So, what happens if you have children, are divorced, and share custody of the kids regarding your taxes? When discussing dependents, the custody that matters is actual physical custody, counted on a night by night basis. The parent who has custody for more than 1/2 of the year (more than 183 days) can claim the child as a dependent, child care expenses, earned income tax credit and, if eligible, can claim “Head of Household” status.
However, the custodial parent can transfer the child tax exemption to the non-custodial parent by providing him/her with a signed copy of IRS Form 8332. Sometimes a parent may be ordered in the decree so sign the form, other times whether to “give” the other parent the right to claim the child(ren) is a matter of the custodial parent’s discretion. This depends greatly on the parties stipulation or by order of the Court.
Child Custody and Tax Implications After Divorce?
If the custodial parent is ordered in your decree to allow you to claim the child(ren) and to sign Form 8332, but fails or refuses to sign, your recourse would be an order to show cause through the court. The IRS will not enforce the parties agreements for you. But even if the exemption is transferred, the custodial parent still is the one that can qualify for head of household, the Earned Income Credit, and the child care credit.
ALIMONY AND TAXES
The party who pays alimony is allowed to claim the payments as deductions on federal tax forms. The party receiving alimony is required to claim it as income on federal tax forms.
Additional questions can be found at the IRS.Gov website. For more information or to set a up a free consultation with one of our lawyers please contact us today.