Often times, my clients come to me around February or March, with the April 15th tax deadline looming, asking about exemptions or credits or deductions, and how they can get them. Well by that time, it is too late. With one of the most contentious tax preferences in the books – children of divorced or separated parents, I will offer some advice ahead of time. Only one parent may claim the dependency exemption for their child during a tax year. They cannot split the exemption.
Normally, the custodial parent takes the exemption. Being the custodial parent means he or she cares for and lives with the child over 50% of the time. However, this can be negotiated especially if there is more than one child involved. The exemption may be able to be split if the non-custodial parent is paying child support. If there is only one child the exemption may be able to be alternated.
If one parent is in a high tax bracket, the exemption may not make much of a difference. Therefore, the parent with the lower tax bracket may receive more in savings with the exemption.
Also, when determining which parent receives the exemption, the parent paying child support must be current in their payments in order to receive it.
If a parent does not allow the other parent to claim the child, the custodial parent must sign the IRS form 8832 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent or a substantially similar statement and attach the form to his or her return.
At this point in the year, there is still time to plan for this exemption if there is only one child. Remember, the IRS counts for the 50% rule by the day, so if your child lives with you from June 30th to December 31, that is more than half.
As divorce or separation can get messy, it would be to your advantage to consult your tax adviser before making any decisions regarding taking the exemption for any of your dependents.
If you have any planning needs or questions, please contact us