Who gets to claim the child tax exemption?

istock_000004891591xsmall.jpg Clients often come to me asking whether they or their ex-spouse/unmarried parent of their child can claim their joint child as a dependents for tax purposes and receive the dependent tax exemption. They often think that this is a decision that is up to them and attorneys often use it as a bargaining chip.

In a divorce or custody case I am representing clients in state court. The United States Congress, through the tax code, has determined how the child/dependent tax exemption should be awarded. The supremacy clause of the United States Constitution prevents state courts from deciding issues of federal law. This means that a state court cannot properly award the exemption to a parent who otherwise would not qualify for the exemption under federal law.

The qualifying parent under IRS rules is the “custodial parent,” which is defined as “the parent having custody for the greater portion of the calendar year.” The award of “legal custody” has no effect on this definition, rather the custodial parent is “the parent with whom the child resides for a greater number of nights during the calendar year.” In cases where the child resides an equal number of overnights with each parent, the parent with the higher adjusted gross income for the calendar year is awarded the exemption.

Parties can agree to share the exemption or to have the parent that does not qualify receive the exemption. This is usually accomplished by a provision in the parties’ judgment. In order to provide the non-qualifying parent with the exemption, the qualifying parent must sign a written declaration and the declaration must be attached to the non-custodial/non-qualifying parent’s income tax return. This can be completed using IRS tax form 8332, which can be found here http://www.irs.gov/pub/irs-pdf/f8332.pdf.

A decision to allocate the dependent exemption to the non-qualifying parent should not be taken lightly. In addition to the exemption, the non-qualifying parent will also receive the child tax credit. Therefore, an agreement to deviate from IRS rules can have significant tax impacts for the qualifying parent and creat a tax windfall for the non-qualifying parent. If the agreement will be included as a provision in a judgment, the decision to do so should be carefully discussed with your attorney.

The IRS faq located at http://www.irs.gov/faqs/faq-kw46.html provides detailed information on this question.

About Daniel Margolin

Daniel Margolin is a founding partner of Stephens Margolin P.C. and a Portland, Oregon native. His practice focuses on all aspects of family law litigation. Dan applies his litigation expertise to provide additional expertise when assisting clients with Family Law Appeals and Collaborative Divorce matters. To find out more or contact Daniel Margolin, visit Stephens Margolin P.C.
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4 Responses to Who gets to claim the child tax exemption?

  1. SaBinh says:

    I still don’t know if this is true or not to the tax exemptions law that if at any time Petitioner pays $700 or more per month in child support for a period of 10 months or more, he shall receive the tax exemption for one of the children and Petitioner for the other.

    Is this sound about right to you?

  2. admin says:

    The post accurately describes who gets to claim the child tax exemption.

  3. tony cordie says:

    I have a current aggreement that has four years remaining with paying $1000 per month spousal support as well as $759 in child support. My ex-wife has been remarried for almost four years and they both work. Is this a case for modification or am I out of luck. I make over $100,000 a year as well as my new wife makes a little more. My ex wife and her new husband makes about $75,000 a year combined not including spousal support. Why should I still be supporting someone who is remarried an has a combined income of the same ammount that they based my income on at the time? Am I crazy or is this modifiable. The spousal support is $500 compensatory and $500 maintenance. I could not afford a lawyer at the time of my divorce and I did not understand any of those facts when I signed the decree. Do I have a case for modification?

  4. This is helpful information – thanks for sharing.

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