One of the bigger changes you will see in your taxes after your divorce could be the result of who gets to claim the children as dependents. Many parents negotiate an agreement on this issue during the divorce process. That agreement then becomes part of the final divorce decree.
Claiming a Child Dependent on Tax Returns
Generally, the IRS considers the child to be a dependent of the custodial parent, the person they live with more often.
But what if parents have equal custody? Or the family wants the non-custodial parent to claim the children instead? Parents sometimes choose to do that to offset the cost of child support by the non-custodial parent. Or they may choose to let the person who most needs the deduction to claim the children.
Parents can negotiate how child dependents will be handled on yearly tax returns as part of the child custody negotiations.
In the case of equal child custody, parents could choose to split the children between the two parents. If there is an odd number of children, the parents can alternate who claims the youngest child from year to year.
Parents will need to include IRS Form 8332 with their tax return (or a similar statement). This form is signed by the custodial parent releasing their claim on the child as a dependent for tax purposes. The non-custodial parent will need to include that signed form with their tax return.
The custodial parent can also revoke their release (even if it was written into the child custody agreement). They need to give (or try to give) written notice to the non-custodial parent the year before they want to revoke the agreement. And they need to file Part III of Form 8332 with their taxes.
One parent or the other will need to include Form 8332 each year they have dependent children they are claiming for tax purposes.
What Happens If Both Parents Claim the Children as Dependents?
It will come as no surprise to a person involved in a difficult divorce or custody case to learn that sometimes a parent who agreed not to claim a child as a dependent might still do so, without any warning.
In this instance, the first parent to file their taxes will claim the children with no problem. The second parent to file will receive a letter from the IRS telling them of a problem with their tax return. See IRS publication 501 for “tie breaker rules” for claiming a dependent child.
Do You Need to Change Your Child Custody Agreement?
The living situation of children may change between the time of the divorce and the time they reach the age when they are no longer a dependent (age 19, or 24, if they are in college). If you will be modifying a child custody agreement or parenting plan, be sure to include information on who can claim the children on their taxes.
Call the Fort Worth Family Law Office of V. Wayne Ward for Help
If you need help negotiating, modifying or enforcing a child custody agreement, call the Law Office of V. Wayne Ward: 817-789-4436. Mr. Ward has decades of experience helping families in the greater Fort Worth area with all issues of family law.