Divorced tax filers sometimes mistakenly assume that they can decide for themselves how to include children as tax dependents. Individuals who have custody of children can substantiate their rightful tax deduction claim by maintaining a written record of residency for the child.
In general, a child must reside in the same household as the tax filer for over half of the year to be claimed as a dependent. A child of divorced parents is likely to spend a number of days with each parent throughout the year. When income tax returns are eventually filed, only one parent is allowed to claim the child as a dependent.
Default tax treatment
The federal tax code is structured in such a manner that the custodial parent usually gets the dependency exemption. There is a support test for claiming a dependent, but it simply requires that the dependent not provide over half of their own support. Total financial support for a child may come from a number of sources, including the non-custodial parent.
Due to their financial contributions toward child support, non-custodial parents sometimes feel entitled to a tax benefit. Parents who have custody mostly on weekends and holidays may occasionally attempt to claim a child as a dependent. By maintaining a logbook or simply marking a paper calendar, you are likely to have adequate evidence to support your tax claim as the custodial parent.
Counting each individual day
The number of days for which you are considered to have custody is the number of nights that you had responsibility for the child. Once you have had custody for over half of the days in a year, it becomes increasingly difficult for anyone else to challenge your claim. As a practical matter, there is a tax form that may be used to allow a non-custodial parent to use the deduction.
IRS Form 8332
Because of the tax advantage of having a dependent, a tax filer with a higher income level may benefit more from the deduction. As the custodial parent, you can allow the non-custodial parent to claim the child as a dependent by completing IRS Form 8332. The form is then filed by the non-custodial parent with their tax return.
The conditions under which you agree to provide Form 8332 may be included as part of the divorce settlement. If not included as part of the divorce, Form 8332 can be utilized at a later date. You can also revoke the status of Form 8332 unless the divorce decree requires it to remain in effect.
Whether Form 8332 is in effect or not, maintaining a record of child residency helps protect your basic right to the tax deduction. Contact a divorce attorney like one from Patton Hoversten & Berg PA for more practical advice on dealing with the legal complications of divorce.
