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The Tax Implications of Split Custody for a Qualifying Dependent

Child custody matters are complex and affect many different aspects of life following a couple’s divorce or legal separation. For example, if ex-spouses agree on split custody of a qualifying dependent, the amount of taxes each person pays may change. This is because claiming a child as a dependent can result in significant tax deductions that may save one parent more money than the other each year.

This article will address the question of who claims a child on taxes with joint custody and other tax implications of split custody following a divorce.

Who Claims a Child on Taxes with Joint Custody?

When parents do not file a joint income tax return, only one parent can claim a shared child as a dependent. However, the IRS establishes federal tiebreaker rules for when joint custody effects qualifying dependents on taxes.

As a general rule, the parent who has the child for the greater part of the year can claim the child as a dependent on his or her taxes. If one parent provides care for the child during 51 percent of the year or more, that parent will likely be the one to claim the child on income tax forms. However, keep in mind that a parent who is a qualifying dependent of another taxpayer cannot claim his or her own dependent.

Who Claims Child on Taxes with a 50/50 Custody Arrangement?

When there is a true 50/50 split in custody between two parents, the IRS takes into account other factors, such as whether both parents are true biological parents and which parent has a higher adjusted gross income. If neither party is a biological parent, the amount of adjusted gross income is often a deciding factor.

An IRS Form 8332 can enable parents to alternate the tax years that each parent claims a dependent child in order to share the tax benefits that each ex-spouse is entitled to. This form is also used to enable a non-custodial parent to claim a child on individual filed taxes. One circumstance that may justify the use of this form is if the parent who is eligible to claim the dependent chooses not to and wants to allow the other parent to claim the child for tax purposes.

The IRS allows you to amend a tax return that you have filed within the last three years or within the last two years of paying the relevant tax if you claimed a dependent child in error. If you can prove that the error was unintentional, the IRS may waive the penalty fee. However, you also may be responsible for paying an additional tax for that year based upon who should have legally claimed the dependent child.

The Risks of Improperly Claiming a Dependent

Two parents who both claim the same child as a dependent or who do not amend their tax returns after discovering an oversight run the risk of facing an IRS audit. An audit of this type typically requires parents to prove the child’s residency and how much time the child spends in each parents’ household. Knowingly attempting to evade income tax is a serious crime and one that comes with significant penalties and fines.

Family Law Assistance in Brooklyn

Whether you are facing a divorce, child custody dispute, or other family law matter, Alatsas Law Firm is ready, willing, and able to help you. We have been serving clients throughout New York for over 20 years and are familiar with the court systems throughout the state. Our experienced and dedicated team will see your case through from start to finish to address your legal concerns and help you achieve the tax benefits you deserve after your marriage ends.