In the process of your divorce, you will address many issues. For most parents, there is no issue more important in a divorce than child custody. That’s understandable. When most parents think about the issues they will confront during a child custody matter, they think of who will spend time with the child and when, how the child will be supported, and what arrangements might work best to ensure that the child continues to feel loved and supported so that they can thrive throughout the divorce and afterward.
That’s where the focus should be, although there are some other issues regarding child custody that are important to address well. Some of those issues are tax-related. One question we are often asked is, who claims a child on their taxes when parents share 50/50 custody? Let’s take a closer look at the law together.
What Tax Benefits Are Available?
Prior to understanding who will claim the tax benefits for the children, it’s important to understand what benefits are available. There are a number of tax benefits available to parents. Some of these include:
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- Earned income tax credit.
- Head of household status
- Child tax credit
- Child, independent care credit
Understandably, these various exemptions, credits, and deductions can create complicated financial issues involving federal and state tax laws. As a result, thinking through tax issues before getting divorced and consulting with an attorney and a trained financial professional is always advised.
Is One Parent “Entitled” to Claim the Children on Their Taxes?
The short answer to this question is yes. According to the IRS rules, the “custodial” parent gets to claim the children on their taxes. This may sound like a straightforward answer, but it can also seem complicated, particularly in situations where parents have truly agreed to share 50/50 custody. Many parents have this arrangement, and truly, the children spend an almost equal amount of time at each parent’s home.
Although this is true, in the eyes of the IRS, the custodial parent is the one who has one more night with the children than the other parent. Just one more night? Yes, because in a truly equal 50/50 split out of a 365-day year, the custodial parent would have the children for 183 nights, as opposed to the other parent’s 182. According to the law, the parent with 183 nights is technically the one entitled to the tax deductions and exemptions.
Are There Exceptions to the Rule?
While the law technically allows the parent with 183 nights to claim tax benefits for the children, this doesn’t necessarily have to be the case. In fact, in the large majority of cases, the best option for most families is to agree upon who will claim the children on their taxes ahead of time. After all, life happens, and sometimes certain plans are made, and events change. Sometimes, the parent who would technically have ended up with 183 nights could end up with slightly less for any number of reasons. It could create a significant amount of financial stress not to be able to make a claim on your taxes that you thought you would be able to make and the good news is that this can be avoided.
The truth is that today, more than ever, the parties to a divorce can address almost all of the issues between them, including taxes, through agreement. Most divorces today don’t involve a husband and wife battling it out in court. Instead, alternative dispute resolution methods like mediation and collaborative law are becoming increasingly popular.
These options offer spouses the opportunity to meet together in a neutral space with the shared goal of working through their issues and finding solutions that work best for everyone. It allows far more freedom and flexibility than being subject to a judge’s order, and many families find it highly preferable. As a result, if you are worried about taxes, budgeting, property division, or any other financial matters, you can rest assured that they can be addressed in this out-of-court setting. As an added bonus, many couples choose to bring in financial professionals and other advisors to help them address whatever issues they are facing.
A Look at Common Tax-Related Compromises
There are many potential solutions for couples who choose to address tax-related issues outside of the courtroom. For parents with 50/50 custody, one of the most popular options is dividing the tax benefits by alternating the years in which each parent claims the children as dependents. In other cases, for families who have multiple children, the parents will agree that each parent will claim the same particular child on their tax return each year.
Although this is general advice regarding child, tax issues, it is important to realize that it is not specific to your circumstances. As with many issues involving taxes, there can be exceptions and certain situations that may prevent a parent from claiming a child on the return. For example, one parent may earn too much money to claim the children as dependents. Or there may be some other reason that disqualifies the parent from making the claim.
In other circumstances, there may be one parent who is not the primary custodian but provides substantially more financial support for the children than the other parent. In a case like that, it may make sense to allow the parent who pays considerable support to claim the deduction, even though 50/50 custody is not shared. A trained attorney or financial professional will be able to review your particular circumstances and give you advice personalized to your situation.
The Law Office of Dustin McCrary – Here for You
Most people don’t love thinking about tax-related issues. Tax-related issues in the midst of a divorce can be even more complicated. That’s why you need a trusted guide to help you through the process. Instead of feeling overwhelmed or confused by the law, you can reach out to us. At The Law Office of Dustin McCrary, we know and understand every aspect of divorce law. We’re passionate about helping our clients through this process each step of the way as they move toward what will hopefully be a better and brighter chapter ahead. If you’re ready to get started, give us a call today. We look forward to speaking with you soon.