When parents divorce or separate, one of the key financial issues they need to address is who will claim their child or children on their tax return. Claiming a child as a dependent can result in significant tax benefits, including eligibility for the Child Tax Credit, Earned Income Tax Credit (EITC) and other deductions and credits that can minimize tax liability. Therefore, if you co-parent with your ex, understanding who is going to claim your child for tax purposes is going to be important as you move forward.
Most of the time, the IRS recognizes the right of parents to determine on their own who can claim their child. Some co-parents even switch off claiming years. Absent such an agreement, whichever parent has their child for more overnights during the year generally has the right to claim them.
Other important considerations
In many custody agreements or divorce settlements, parents or the court outlines who has the right to claim the child as a dependent each year. Some agreements specify that the parents will alternate years, while others may assign the tax benefits to one parent consistently. It’s important to follow the terms of any existing court order or agreement to avoid disputes and potential penalties from the IRS.
If both parents try to claim their child as a dependent in the same tax year, the IRS will apply its “tiebreaker” rules. These rules prioritize claims based on factors such as the number of nights the child lived with each parent during the year, the parent’s adjusted gross income (AGI) and other criteria. The parent with whom the child spent the most time will typically be entitled to the dependent claim. If the time is equal, the parent with the higher AGI usually prevails.
Determining who will claim their child on their tax return is, therefore, important for a number of reasons. Understanding IRS rules, following court agreements and communicating clearly can all be beneficial when it comes to navigating this particular issue.
