Orange County: After a Divorce, Who Can Claim the Child as Dependent on Their Taxes?

After a divorce in Orange County, the law only allows one parent to claim their child as a tax dependent. Often by default, the IRS gives this right to the custodial parent. Still, there are ways to change this default rule and provide these child-related tax benefits to the other parent. With all these tax rules and exceptions, it can leave any divorced parent feeling confused, especially when it comes down to child-related tax breaks. Today, we hope to answer some of the more confusing child-related tax questions and offer you some clarity to this complicated situation. 

What is a Dependent Child?

Before we examine who gets to claim a child for tax credits, it is essential to discuss what exactly qualifies a child as a dependent and what factors need to be met to show a parent-child relationship.

1. The qualifying child must be under the age of 19 at the end of the tax year, or under the age of 24 if disabled or a full-time student.
2. The qualifying child must have lived with the parent, claiming them as a dependent for more than half of the year.
3. The qualifying child must not have provided more than half of their own support for the year.

How to Know if You Are The Custodial Parent

Usually, for tax purposes, a child who lives with a parent for more than half of the year is treated as “belonging” to that parent. This parent is often referred to as the custodial parent, while the other parent is considered as the non-custodial parent. Under the general tax rules, the custodial parent is entitled to claim the dependency exemption when filing their taxes. However, there are exceptions to this rule, and a non-custodial parent can claim a child as a dependent if certain factors are met, and the custodial parent agrees to this. 

How Can a Non-Custodial Parent Claim the Child as a Dependent?

Even though the custodial parent may allow the non-custodial parent to claim the child as a dependent, the non-custodial parent still needs to meet certain other factors before this can happen. 

• Support: Under this support requirement, over half of the child’s support must be provided by both or one of the parents.
• Separated or Divorced: Under this requirement, the parents have to be separated or divorced at the end of the year, and they must have a written agreement. Or have lived separately for the last six months of the year. 
• Custody: Under this requirement, the child must be in the custody of at least one or both the parents for over half of the year.
• Written Declaration: Finally, under the written declaration requirement, the custodial parent needs to sign a written declaration that releases their rights to the non-custodial parent of claiming the designated child as a dependent for the year. The custodial parent needs to sign the IRS Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent), and the non-custodial parent has to attach a copy of this form to their Form 1040. 

What Happens With a Joint Custody?

Under a joint custody arrangement, the parent who has physical custody of the child will usually claim them as a dependent and obtain the child tax credits. However, in certain circumstances, a judge or a written agreement may establish other arrangements. Sometimes the court may have the parents taking turns who gets to claim the child as a dependent, or if there are multiple children, then the court may divide the children up between the parents for tax benefit purposes.

What Tax Benefits Are You Entitled To?

Whether it’s the custodial or the non-custodial parent that claims the child as a dependent, they can be entitled to some of the following tax benefits:

• Child Tax Credit
  • If the child is under the age of 17, and the parent makes under $200,000 as a single parent, they can be entitled to $2,000 per qualifying child. 
  • If the child is over the age of 17, then the parent can claim $500 for a dependent child, but the child must meet the income test for the parent to qualify.
• Education Credit or Education Expense Deductions
  • American Opportunity Credit can be worth up to $2,500 for the first four years of a child’s college education.
  • Lifetime Learning Credit can be worth up to $2,000, and can cover any higher education tuition costs.
  • Both credits are phased out as the custodial or non-custodial parent’s income increases.
• Student Loan Interest Deduction:
  • This specific deduction can go up to $2,500 for a qualified student loan interest expense that is paid by the custodial or non-custodial parent. However, it is subject to phase-out for higher-income parents. 

Even though a non-custodial parent can claim a child as a dependent for tax purposes and obtain certain tax benefits, the following tax benefits ONLY apply to a custodial parent. 

• Child and Dependent Care Expenses
  • Depending on the custodial parent’s income, this credit reimburses the parent for child care expenses up to a certain amount. 
• Earned Income Credit
  • This credit is available to the custodial parent whose earned income is below a certain amount and will also depend on how many qualifying children they have.
• Head of Household Filing Status
  • Filing for Head of Household can provide the custodial parent with a more significant standard deduction and looser tax brackets than if they would file as a single taxpayer. 
• Child Care Assistance 
  • This credit is available to the custodial parent for a certain amount and refers to their qualified childcare expenses under an employer-sponsored dependent care flexible spending account (FSA) arrangement.

Finally, certain tax breaks can apply to BOTH, the custodial, and the non-custodial parent, regardless if the non-custodial parent can claim dependency.  However, three of the above requirements still need to be met  (including the divorced or separated requirement, the support requirement, and the custody requirement.) These benefits can include: 

• Itemized deductions for the child’s medical expenses that are paid by the parent.
• HSA (tax-free health savings account) distributions that are used to cover the child’s medical expenses.
• The tax-free employer-provided healthcare benefits for the child. 

Why Call Pedrick Law Group?

Even though the above guidelines provide a basic breakdown of who can claim a child as a dependent after a divorce, it does not cover every situation. In some instances, parents decide to claim the child as a dependent even though they are not qualified to do so. In those situations, it is essential to be prepared with an experienced attorney that understands these complex tax and family laws and can help guide you through this stressful process. Attorney Gregory J. Pedrick is a certified Family Law Specialist, who practices Family Law and Business Law in Orange County, California. He understands that family law issues are not isolated incidents and that these disputes can affect all areas of your life. That is why the Pedrick Law Group provides its clients with comprehensive legal guidance, as well as the dedication and attention their case deserves. The firm’s goal is to not only help their clients resolve their family law issues, but also to guide them on how they can plan for the long term. If you are experiencing any complex financial situations due to your divorce,  don’t wait any longer, contact us at (949) 388-8682 to talk to a lawyer today. 

Sources:

After a divorce, only one parent can claim child-related tax breaks. (2019). By Bill Bischoff. Market Watch. 

IRS Publication 501: Exemptions, Standard Deduction, and Filing Information

IRS Publication 503: Child and Dependent Care Expenses.

IRS Publication 504: Divorced or Separated Individuals

IRS Publication 790: Tax Benefits for Education 

IRS Publication 972: Child Tax Credit