One of the most frequent questions I get during tax season is: who gets to claim the child/children on their taxes when parents are separated, divorced, or have never been married? It also happens to be an area where I see many people make mistakes that cost them on their tax return and in their bank account. The deduction for a child for the tax year 2011 was $3,700, and the IRS has a child tax credit worth up to $1,000 per child for qualifying taxpayers. These two deductions or credits, in addition to other child related expenses or deductions, can make a significant difference in your tax liability. Therefore, when parents are separated or unmarried it is important to understand your rights when it comes to claiming a child as a dependent.
Generally speaking, the parent who is considered the custodial parent or primary custodian is entitled to claim the child as a dependent for tax purposes. The IRS considers the custodial parent to be the parent who has the greater amount of time with the child during the year. In many cases, it’s clear which parent has the majority of the time. However, many parents have a schedule that intends for parents to share time equally with the child. In these cases, there are specific IRS rules to determine how periods of time with each parent are calculated and who is the custodial parent. In the absence of an agreement to do otherwise, these rules are used to determine who is able to claim the child as a dependent on their tax return.
Often, parents will discuss this issue and reach an agreement on who will claim a child as a dependent. When there are multiple children to the same parents, they may "split" the children, and they each claim one or more. Other parents agree to alternate years so that every other year, each parent gets to take the deduction. Either of these situations are fine, provided that you follow the rules the IRS has set out for a non-custodial parent claiming a child. Those rules provide:
- The parents must be divorced or legally separated under a decree of divorce or separate maintenance; separated under a written separation agreement, or lived apart at all times during the last 6 months of the year, whether or not they are or were married;
- The child received over half of his or her support for the year from the parents;
- The child is in the custody of one or both parents for more than half of the year; and
- The custodial parent signs a written declaration that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return.
If parents can meet these four requirements, then their agreement for the non-custodial parent to claim the child can be honored and will be accepted by the IRS.
Many parents are under the mistaken belief that claiming a child is "a race to file." In other words, the first parent to file a tax return and claim the child is the one who gets the deduction. This is simply false and does not affect the rights of the custodial parent to claim the deduction. The order in which the returns are filed does not allow taxpayers to bypass the IRS guidelines.
While every situation is unique and it is always a good idea to ask your tax preparer about your specific circumstances, following these rules and regulations can help ensure that you do not miss out on the opportunity to claim a child as a dependent and that you are following the IRS guidelines.
To ensure compliance with requirements imposed by the U.S. Internal Revenue Service in Circular 230, we inform you that any tax advice contained on this blog is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the U.S. Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication.