How Your Child Custody Arrangement Impacts Your Taxes

Divorce is never easy. Sharing custody of a child can also add complications. While a 50/50 custody split seems like the fair and healthy thing to do for your child, the arrangement can have a profound effect on what you owe Uncle Sam at year’s end. The obvious question is this: Who claims a child on taxes with 50/50 custody?

Laura Gillis Law Office says the answer is not so simple. There are numerous rules to consider. Understanding the rules that surround tax claims is of vital importance when it comes to complying with IRS laws. For divorced parents, it’s necessary to have a grasp on the nuances of claiming a child on taxes with 50/50 custody or 0/50 custody split. This is where a tax lawyer can be of help.   

That said, how do you go about preparing your taxes when you share custody of your child? According to a recent report by Parents, the IRS isn’t famous for making things simple and easy when it comes to making out your taxes, but for legally separated or divorced parents, things can be even more confusing, especially when it comes to which parent gets to claim the kid or kids as dependents on their tax return.

But the fact is parents who are able to claim their children as dependents expose themselves to a variety of tax credits that can add up to some real cash when it comes time for a refund check to arrive. This means it’s definitely worth looking into who gets to claim which child as a dependent if you are divorced and share custody with your ex.  

Here are some steps you need to take.

Decide Who is the Custodial Parent

It’s generally regarded that the parent who spends the majority of the nights with the child over the course of any given year is regarded as the official custodial parent. This is the individual the IRS will favor when it comes time to decide on who is the responsible dominant parent.   

If you and your ex-spouse have a 50/50 equal custody arrangement, and the child is spending about the same amount of time with both of you, the IRS is said to favor the parent who earns the highest adjusted gross income or AGI when the time comes to determine who they will approve as the dependent.

However, it’s also possible for parents with 50/50 custody to alternate years as dependents. If you happen to be a custodial parent, either by earning the highest AGI or because of the amount of nights the child spends with you, and you wish to transfer dependent status to your ex, the IRS can help you accomplish this via a form that can be filled out online.

Make Certain You’re Not Duping Dependent Claims

It’s possible that your legal custodial agreement or court-sanctioned divorce decrees have already determined which parent will be allowed to claim the child on their tax return. You need to check your divorce paperwork prior to filing so you and your accountant get it right. If both you and your ex end up claiming the identical child, it could warrant an IRS audit, which is something neither party wants. 

If you have multiple children to consider, the IRS will allow both parents to claim at least one of the kids as a dependent. Again, check your divorce file to see if this is a legal possibility.

Make a Determination About which Deductions and Credits you Qualify For

Says Parents, there exists a variety of deductions and tax credits both divorced parents can become eligible for when they decide to claim a child or children. The Child Tax Credit and Child and Dependent Care Tax Credit are popular with the parent who is claiming a child as a dependent.

Also, the Earned Income Tax Credit is engineered for parents who are considered low to moderate-income earners if they are claiming a child or children on their return. It’s also legal to deduct many medical expenses associated with a dependent child. Be sure to check not only your divorce records and your accountant’s to make certain you are in complete compliance with the IRS prior to filing.

Divorce is difficult and confusing, even in the best of times. Taxes and IRS rules can be even more confusing and anxiety provoking. If you are able to work with your ex to determine without question who will be able to claim your child or children on their tax returns, you should consider yourself lucky.

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