In case of a divorce, the custodial parent can usually claim children as their dependents.
The IRS (Internal Revenue Service) however defines the term “custodial parent” differently from the family courts.
Sometimes, the decree of your divorce claims you as the parent with custody. But the IRS can say otherwise, qualifying the other parent to claim child on taxes as well.
If you are stuck in such a situation, this article will guide you.
How does the IRS know who the custodial parent is?
If you want to claim your child as a tax dependent, you must determine who the custodial parent is between you and your estranged spouse. This is a requirement by the IRS.
The IRS defines “custodial parent” as the parent who had the child for the longest duration during the tax year.
By virtue of being the custodial parent, he or she is also the identified “head of household”. Only the custodial parent can claim tax dependency on the child.
However, if the divorce is settled on joint child custody, things become a little complicated.
As per the IRS, if both parents have equal custody of the child, then the custodial parent is the one with the higher gross income (after adjustment).
The parent with higher income is identified as “head of household” and can claim tax dependency on the child.
Parents can also decide among themselves to share the tax exemption for their child. To do this, the parents must sign a specific form by IRS.
Then, non-custodial parents can also share the claim to tax exemption for their child.
Can father claim child on taxes if child does not live with him?
Yes, a father can claim child on taxes even if the child does not live with him. However, if the court designated the mother as the custodial parent, then the father cannot claim child on taxes.
If no such arrangement has been reached, then the father can get tax exemptions for the child.
To qualify the child as a dependent, he or she must meet the following requirements –
- The person / child must not be somebody else’s dependent child, who also pays taxes.
- The person / child must earn a gross income of less than $4,300 a year.
- No joint return must be filed unless the person wants to claim a refund of income taxes withheld or estimated taxes.
- In case the filing separate returns, no tax liability should exist for either the person or their spouse.
Can parents take turns claiming child taxes?
If the court during divorce identifies one of the parents as the “custodial” parent, then only that parent can claim child on taxes.
But, if both the parents share a joint custody, then the parent with the higher gross income (after adjustments) gets to rightfully claim the child on taxes.
However, there is also a provision where both parents rotate their share of exemptions on taxes. In this case, the non-custodial parent can only get exemptions if both parents agree upon it.
The custodial parent must decide to not get exemptions for the child on their own tax returns. Then, the estranged couple must sign and file an IRS form, called Form 8332.
A similar written document by the custodial parent will also work.
This IRS form approach also works for parents with joint custody. They can alternate tax exemptions for the child between different tax years.
What happens if the non-custodial parent claims child on taxes?
Normally, the custodial parent gets exemptions for the child in their tax returns. In essence, the child is the qualifying ward of the custodial parent who is identified as “head of household”.
But under some circumstances, the non-custodial parent can get the qualifying ward. This means, the non-custodial parent can claim child on taxes.
These special circumstances are –
- The parents must be legally separated or divorced under separate maintenance or a decree of divorce.
- Or, the parents must be living separately from each other under a separation agreement that is written and agreed upon by both parties.
- Or, the parents have been living away from each other for the last 6 months of the assessment year. It does not matter whether they were divorced or married.
- The qualifying child in question must have received at least half of their support from their parents during the assessment year.
- The child must be in custody of either or both of the parents for a duration of more than 6 months during the assessment year.
- IRS form 8332 or a similar written form must be signed and approved by the custodial parent.
- Then the non-custodial parent can submit this form to claim exemption for child on their tax returns.
What Happens if Both Divorced Parents Claim Child on Taxes?
Only one of the two divorced parents shall qualify as the custodial parent. When determining who the custodial parent is, the following outcomes are possible –
- During the divorce proceedings in the family court, the judge can identify either of the parents as the custodial parent.
- The custodial parent is recognized as the head of household, responsible for raising the child and making important choices for them.
- The IRS will also acknowledge the family court’s decision and allow the custodial parent to claim child on taxes.
- In case of a joint custody, the parent with more gross income will get access to exemption for the child on taxes.
- For both parents to claim child on taxes, the pair would have to sign and submit form 8332.
- Form 8332 allows the custodial parent to give the non-custodial parent the right to claim child on taxes.
- Interestingly, both parents cannot claim child on taxes during the same tax year. They must switch every year to get exemptions for child on tax returns.
IRS Divorce Rules
There are some tax considerations you must make a note of if you are divorced or are filing for a divorce.
· You must update your withholding after your divorce. To do this, submit new Form W-4 with your employer in order to claim proper withholding.
· You must pay estimated tax in case you are a recipient of alimony.
· For the purposes of Federal Tax, the money you pay to your spouse could be considered separate maintenance payment or alimony.
· This payment to your spouse could be under a written separation agreement, s separate decree of maintenance or a divorce decree.
· The spouse who pays can deduct certain separate maintenance payments or alimony.
· Meanwhile, the spouse who receives payment has to include this in their income.
· If a separation agreement or divorce is executed after 2018, spouses do not have the right to deduct separate maintenance payments or alimony.
· If property transfer happens due to divorce, there is no loss or gain on that transfer between current or former spouses.
· If spouses get divorced towards the end of the year, they will be considered and treated married for that year.
· The couple must then determine their own filing status.
· There are four types of status that a divorcing or separated couple can consider.
· The first status is the married filing jointly. It allows the couple to report their incomes in combination. They can also deduct their allowable expense after combining.
· The second status is the married filing separately. Couples file taxes separately. Each spouse reports on their individual income and expenses.
· The third status is the head of household. By becoming head of household, a spouse gets to claim their child for tax exemptions.
· The fourth status is single. After the divorce is finalized, a spouse will be identified as an individual at the start of the next tax year.
Alternating Years Claiming Child on Taxes Stimulus
To understand this, here is an example:
Assuming the parents are looking for stimulus on tax returns filed in 2021 –
The parent who claimed the dependent (qualifying child) most recently would receive the EIP3 (third stimulus payment) in the beginning of the year 2021.
But the parent who will now claim the dependent during their 2021 tax return can now claim RRC (Recovery Rebate Credit) for any EIP3 funds that are missing.
FAQ Related to when Divorced, who Claims Child on Taxes:
Which Parent has the Right to Claim Child on Taxes?
The parent who has been identified as the custodial parent can claim child on taxes.
In case of a joint custody, where both parents are custodial parents, the parent with the highest gross income after making adjustments can claim exemptions for the child during tax returns.
Both parents can also agree to share tax exemptions by switching their custodial status every alternate year.
What Happens if Divorced Parents Both Claim a Child on Taxes?
Only the custodial parent will be allowed to claim the child on taxes.
If the non-custodial parent wants to claim tax exemptions, they must get the custodial parent to sign IRS form 8332.
Can Father Claim Child on Taxes Without Permission?
Yes, if the father is identified as the custodial parent in the family court, he can claim child on taxes without permission.