As the countdown to file your tax return winds down to the April 18 tax deadline, the pressure builds as thousands of taxpayers contend with the vital issue of claiming dependents on taxes after divorce.
Divorce procedures are financially and emotionally straining enough, but often, new divorcees are caught in a battle with their ex-spouses come tax time. Claiming dependents comes with a tax deduction that lowers one’s financial obligation to Uncle Sam.
However, when disputes arise over who can rightfully claim the children as a tax exemption, determining the legal requirements of claiming dependents becomes integral in shifting the exemption in your favor.
What’s at Stake When Claiming Dependents
If you’re a divorced taxpayer, there is much at stake when claiming dependents as a tax exemption. Claiming a qualifying child, or dependent, grants you a subtraction of $4,000 per child from your 2015 adjusted gross income (AGI). This is no trivial tax break, especially when multiple children are in question.
The trying factor, however, is that each child can only be claimed once, per federal regulation — meaning that one parent will reap the financial rewards of claiming the child, while the other gets nothing — regardless of any child support provided.
What About the New Phaseout of Exemptions
Although this doesn’t apply to most cases, in some instances the claiming parent or guardian might make over a certain amount to cause the $4,000 exemption to be reduced. Here are the amounts for each filing status:
|Filing Status||AGI Level That Reduces Exemption Amount|
|Married Filing Separately||$154,950|
|Head of Household||$284,050|
|Married Filing Jointly||$309,900|
If this is the case for you, and you earn over the above amount, you must reduce the amount of your exemption. The amount must be reduced by 2 percent for each $2,500, or part of $2,500 — $1,250 if you are married filing separately — that your AGI exceeds the amount shown above for your filing status.
Also, if your AGI exceeds the amount by over $122,500 — or $61,250 if married filing separately — then your deduction for exemptions is zero.
Who Can Legally Claim the Kids
In decades past, claiming children on taxes was a fairly simple deal. Whomever the child lived with permanently got dibs on claiming the exemption. With the rise of divorce rates and evolving divorce conditions, like joint custody and long-term vacation visits, understanding which parent can claim the kids has become a bit more convoluted.
Typically, the first point of research are the divorce filings. If the terms of the divorce clearly identify a custodial parent, or the parent who holds primary custody over the child, then that parent is legally entitled to claim that child as dependents on his taxes if they also pass five qualifying child tests.
Qualifying Child Tests for Claiming Dependents
In addition to knowing whether you’re within your right as a custodial parent to claim your child on your taxes, you’ll also need to pass five tests required by the IRS to validate that your request for a dependent exemption actually qualifies you to make that claim.
- Relationship: The dependent must be your son, daughter, foster child or descendant (e.g. grandchild), or your brother, sister, step-sibling, or extended descendant (e.g. nephew).
- Age: The child must have been under 19 years old and younger than you, or have been under 24 years old, a full-time student and younger than you in 2015. Tax filers also meet this test requirement if the child was “permanently and totally” disabled last year, regardless of age.
- Residency: The child must have lived with you more than 50 percent of the year.
- Support: The child must have not provided more than 50 percent of his own support over the year.
- Joint filing: The child must not be filing a 2015 joint tax return. An example of this is if the child got married last year and intends to file a joint tax return with his spouse.
These standardized qualifying relative tests help guide divorcees when claiming children on taxes. In many cases, however, the delineation isn’t so clear, especially in the case of shared custody. If the child meets the requirements for the above for more than one parent or guardian, only one can still claim the child.
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Claiming Dependents Under Joint Custody
Some divorce scenarios leave parents with a 50-50 joint custody agreement. These circumstances are where the most trouble arises, as there is sometimes no written determination as to who is permitted to claim the children on taxes after the divorce.
Regardless of the divorce custody arrangement (i.e., primary custody versus joint custody), the fact still stands that children can only be claimed as a dependent by one person each year.
Options for Claiming Dependents in Joint Custody Arrangements
While not the ideal tax solution for all parties involved under joint custody, there are still options available when claiming children on taxes. These two suggestions are the most popular ways to resolve the issue:
- Alternate years: A common remedy for the exemption tug-of-war is for parents to alternate years when they claim their child. This tax season, parent A can claim the dependent and the following year parent B can do the same. This swapping ensures that both parents receive equal financial benefit from the exemption.
- Divide up the kids: In the case of claiming multiple children, it can get confusing to keep track of which parent gets to claim which child each year. A way to address this is to split dependents evenly between divorcees. For example, parents with four children in total can claim the same two children each year to avoid a mix-up.
Since both parents above can legally claim their children on taxes due to the joint custody agreement, the parent who is waiving his right to claim the children for the year will need to sign form 8332, or similar statement, releasing the exemption to the filing parent.
Similarly, in a non-joint custody arrangement, the primary custodial parent can relinquish the exemption to the non-custodial parent at his own discretion by signing form 8332. Parents claiming dependents will then need to attach this form to their 2015 tax returns to complete the process of claiming dependents.
Do Your Homework When Claiming Children on Taxes
When addressing the issue of claiming children on taxes, it’s important to go through the motions and research your rights. This exemption, like other tax breaks or tax deductions, is heavily scrutinized by the IRS.
Getting over the hurdle of a divorce and determining dependency exemptions is challenging enough, so don’t invite further hardships by risking an audit. In the event that your taxes are put under the magnifying glass, have the supporting paperwork organized and on-hand to prove your case.
Jamie Young contributed to the reporting for this article.