Claiming one or more dependents on your tax return can yield significant benefits. However, sharing equal custody of your children with someone else may complicate your tax situation. Fortunately, the IRS has specific rules in the tax code to determine which parent may claim the child as a dependent for tax-related purposes.
How Does the IRS Define “Custodial Parent” and Dependent?
According to IRS regulations, only one parent can claim the children as dependents for tax purposes. Therefore, in the eyes of the IRS, there is no joint custody – there is only one custodial parent. Additionally, children must meet a specific definition of “dependent” for the parent to claim the child on the tax return.
Understandably, it may seem challenging to determine who the “custodial parent” is for tax purposes when the parents technically share joint custody. For tax purposes, however, the “custodial parent” typically has 183 overnights or more with the children. Even when parents share parenting time equally, as there are an odd number of days in the year, one parent will have more overnights with the children than the other.
This is a unique aspect of tax law that can have unexpected consequences. For example, one parent may think they will have 183 overnights a year, but an extended vacation or a work trip out of town may cause the parent to have slightly less than half of the days that year. In that case, the other parent could technically claim the children on the taxes for that year.
Regardless of who claims the child as a dependent, for a child to be claimed as a dependent, the child must meet the qualifications established by the IRS. This means that the child must be younger than 19 years old, or if above the age of 19, they must be a student younger than 24 years old at the end of the calendar year. There is an exception to this rule for children who are permanently disabled – in that case, age does not matter.
Understandably, this can be confusing. For that reason, when it comes to tax-related matters and other issues, parents can agree to an alternative arrangement that works best for them if they choose.
What Alternative Arrangements Are Available?
Sometimes, parents who share equal time will choose to share the tax benefits by alternating the years each parent claims the children. In other cases, the parents may divide the tax benefits by having the same parent claim the same child each year. For example, if a couple had a son and a daughter, the mom might claim the son on her taxes yearly while the dad claimed the daughter, or vice versa. Another option, if a couple has three children, is for the first child to be allocated to one parent, the second assigned to the other parent, and then to alternate years for the third child.
How Do Couples Negotiate Divorce-Related Issues?
Ideally, negotiating a resolution to tax-related issues and other matters you confront during your divorce is ideal for all the reasons we’ve discussed. Addressing these issues outside of court gives couples the freedom and flexibility to reach the best outcomes for their family and their future. After all, no judge will ever know your family like you, regardless of how well-intentioned they may be. This is ideal if you and your spouse can work together to find solutions that work well for everyone.
Now, more than ever, many couples choose to settle matters outside of a courtroom, and many options exist. Three commonly used methods include:
- Mediation: Mediation consists of the couple and often their respective attorneys meeting in a neutral location with an objective third party called a mediator. The mediator’s job is to listen to how each person feels about the issues and then help the parties work toward solutions and compromises that work for everyone involved. After a mediation, the parties draft an agreement that outlines the resolutions they agreed on. The agreement is then submitted to the court for approval.
- Arbitration: Arbitration is like mediation insofar as the goal is for the parties to resolve their issues outside of court. Unlike in mediation, however, there are specific rules that the parties must follow, and an arbitrator who is assigned to the case will ultimately decide on the issues presented. It is less formal than a courtroom setting but more formal than a mediation.
- Collaborative Law: Collaborative law is a newer but increasingly popular method of resolving issues outside court. The parties and their attorneys meet and try to work together to determine the divorce-related matters. Specific “rules” are associated with the collaborative law process, one of the most important of which is that if the parties cannot resolve their issues outside of court, both attorneys will withdraw from the case instead of going to court. Collaborative law can often be very effective, as the attorneys practicing it are trained in helping couples communicate openly and cooperate to find solutions for their issues.
Each method is slightly different, but all are excellent options for avoiding the stress, expense, and time associated with courtroom litigation. These methods are well worth considering for resolving tax-related problems and a variety of other issues.
Regardless of which method you choose to find resolutions for your issues, one thing is sure. You’ll want an attorney who knows and understands the law and can give you the advice and guidance you need. At The Law Office of Dustin McCrary, we’re here for you.
Call the Law Offices of Dustin McCrary Today
Tax-related matters can be complicated, like many issues you may confront during divorce. If you feel overwhelmed or unsure of what steps to take next, you should know those feelings are normal. You should also know that you aren’t alone. At The Law Office of Dustin McCrary, we understand these complicated issues.
We know and understand every aspect of divorce law because that’s all we do. We are passionate about helping our clients through this process and move on to a better chapter ahead, and we’ll work with you to address your issues confidently and work toward the best outcomes for your family and your future. If you’re ready to get started, contact us today.
We look forward to speaking with you soon.