Being a parent is emotionally and spiritually rewarding in numerous ways, but it is also expensive. One way parents get a financial break is through the IRS’ tax exemptions for the parents of a dependent child.
However, these important tax breaks can become a confusing issue when the child’s parents are separated or divorced. The IRS does not allow both parents to claim a dependent child, and parents are also forbidden to share the various tax breaks. So who gets them?
The IRS uses a series of tests to determine which parent qualifies to claim a child as a dependent. In situations where the parents are divorced or separated, the parent who provided more than half of the child’s support usually is allowed to claim the exemption. But this is not always true. If the noncustodial parent meets other tests, the IRS may allow him or her to claim the exemption instead.
Also, the custodial parent can voluntarily give up the tax benefits and grant them to the noncustodial parent by filling out a form. This may be done in exchange for other benefits granted to the custodial parent as part of the divorce agreement.
Taxes are rarely the first thing that parents think of when they decide to get divorced. And a child custody arrangement should have the child’s best interests at heart, not how much each parent will have to pay in income taxes next year. Still, these tax considerations are a factor to keep in mind when working out a child custody arrangement.