[IMPORTANT editor's note: When I wrote this post, I began with "I don't think so" because the rules are very confusing and this falls under an exception. Since the original post, I've been made aware that I was wrong. Hey, it happens. I've chosen to retain the original post since the comments address what's wrong - rather than rewrite it. Rewriting it just didn't feel right. So please read the comments. They provide valuable information about the right answer - and where exactly I went wrong. Thanks to readers Mary and Kim for writing in!]
Taxpayer asks:
I have been divorced for 3 1/2 years. We have two kids together and in the divorce agreement it says that we would each take a child as a tax dependent exemption for tax years 2005, 2006, 2007 and 2008 and then he will get both in 2009. The two kids lived with me 202 days out of the year (overnights) and my ex pays me $660 a month in child support.
Since my divorce I have filed head of house hold and took one exemption, the child care credit and one child tax credit. In 2009, when he is allowed to take both children on his return, will I still be able to file head of household and take my child care credit, even though I do not claim them as an exemption?
Taxgirl says:
I don’t think so. If you and your ex have agreed that you will alternate tax years to claim the children, the related tax benefits apply only to the parent who makes the claim. In other words, tax benefits are available to the parent claiming the child, assuming that the benefits apply in the first place. These benefits include:
- Personal exemption
- Child tax credit
- Head of household filing status
- Child and dependent care credit
- Dependent care benefit income exclusion
- Earned income credit
So, for years in which your ex claims the children, you cannot claim any of these benefits. As far as the IRS is concerned, you cannot divide tax benefits related to qualifying children between the two of you in the same tax year.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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{ 12 comments… read them below or add one }
Sorry, wrong answer! Because she is the custodial parent, she will still get to claim head of household, the dependent care credits and earned income credit for the years she releases the exemption to the father. Only the child tax credit and the exemption goes with the dependency, the rest of stuff stays with the custodial parent. So even if you pay daycare for the child you are not claiming that year, you can still take the credit for the daycare costs if you pay them. You may want to see about amending your return for those years.
I teach basic tax class for H&R Block and that is something we stress in our chapters on dependents.
Kim is right.
IRS VITA training stresses that too.
I call it the “exception to the ‘No King Solomon’ rule.”
In the situation you describe, the non-custodial father could never get HoH, daycare credits, or earned income credit for the children for a particular tax year unless the children lived with him for more than half the tax year. Since the children lived with him for at most 146 days (=366-220) in 2008, the only child-related benefits your correspondent could legally release to the non-custodial father are the dependent exemptions, child tax credit (CTC), and additional child tax credit (ACTC).
The law is confusing (and it changed a few years ago), so your confusion is understandable.
There is another “all or nothing” rule, which may be what you were thinking of. If the taxpayer lived with the children in the same household along with another suitably related adult (e.g., the children’s grandparent, aunt, uncle, adult older sibling, etc.) then she could release ALL of the child-related tax benefits to that adult (or NONE of them) and nothing in between. That’s what I call the “No King Solomon” rule: if two or more eligible adults live in the same household with a qualifying child, then whoever claims one child-related benefit gets them all. There’s no splitting the benefits up among the adults who live with the child–it’s all or nothing.
But the one exception to the “No King Solomon” rule: that’s the case in which there is a non-custodial parent and the custodial parent signs a Form 8332. If you read the instructions for that form, it is very clear–it ONLY releases the exemption, CTC, and ACTC. Under no circumstances can EIC, HoH, or daycare credit go to a parent who did not live in the same household with the children for more than half the year.*
(* One must bear in mind, however, that the IRS does not define “live with” the same way the rest of us do. A child could be away at boarding school for 9 months of the year, for example, and still be considered to be “living with” his parent all 12 months because the IRS considers that to be a “temporary absence.”)
Here’s the post I wrote up on the subject for my VITA students:
http://bedbuffalos.blogspot.com/2009/01/no-king-solomon-rule.html
The dependency rules are probably the most important single source of errors on tax returns for low-income working families. Getting them wrong could cause a huge amount of trouble for the family down the road, so my students and I take extraordinary care with these rules at our site.
Mary O’Keeffe
Union College VITA Schenectady NY
Mea culpa.
Thanks much for the clarification.
I agree that it’s tricky and quite frankly, Pub 501 is not terribly clear on that point.
The exception that you’re talking about is here: “If a child is treated as the qualifying child of the noncustodial parent under the rules for children of divorced or separated parents described earlier, only the noncustodial parent can claim an exemption and the child tax credit for the child. However, the noncustodial parent cannot claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. Only the custodial parent or another eligible taxpayer can claim the child as a qualifying child for these four tax benefits.”
Literally, pages and pages of explanation about children of divorced parents – and a three sentence exception. But an important one.
I suspect it’s going to become more complicated in the future. Whereas you used to be able to attach the applicable pages of your divorce decree, beginning with your 2009 returns, “the noncustodial parent will no longer be able to attach pages from the decree or agreement instead of Form 8332 if the decree or agreement was made after 2008. The noncustodial parent will have to attach Form 8332 or a similar statement signed by the custodial parent and whose only purpose is to release a claim to exemption.”
Which begs the question, if the custodial parent won’t sign, what happens? Does the IRS then go to the tie-breaker rules?
Kelly asked:” Which begs the question, if the custodial parent won’t sign, what happens? Does the IRS then go to the tie-breaker rules?”
The answer to that is easy.
If the custodial parent won’t sign the release, then as far the IRS is concerned, she can claim the benefits for the child. It’s not the job of the IRS to enforce divorce agreements.
I’m not a lawyer, but I assume the only avenue of recourse for the non-custodial parent in a situation where the custodial parent refuses to sign the release would be to go to the Family Court judge who issued the decree to get an order forcing the custodial parent to sign the necessary paperwork releasing the claim to exemption.
Thanks, Mary! I would agree with you – though I don’t practice family law.
Similar question. I have two kids with split custody (they each live with my ex and myself half the time). The divorce decree says we each can claim one. However, we are going to figure the taxes according to the decree, and are willing to let the other claim the child if beneficial for tax purposes and split the difference. One of us makes about 60,000 and the other 17,000 with standard deductions and not much for other items (ie – loss, non itemized). Also, we were divorced in 2008 so we can make the child care expenses max out either way (6000).
Since the kids don’t actually live with one more than the other, I think it would be ethical to work it either way.
1. Low income parent: claims EIC on both, child care, HOH
High income parent: claims both dependents, single (can they also claim HOH), no child care
2. Low income parent: claims EIC on one child, HOH
High income parent: claims both dependents, HOH, child care on 1 child
I realize this is kind of complicated and probably not the greatest description, but would greatly appreciate any advise.
Scott’s question raises some provocative tax policy questions for my students to consider, so I’ve addressed it in a post to my class blog here:
http://bedbuffalos.blogspot.com/2009/03/provocative-question-from-taxpayer.html
I used the National Bureau of Economic Research TaxSim model to project 2009 estimated tax liabilities. It turns out that taxes under option 1 are lower than under option 2, but either Scott and his ex-wife will face a lower total tax bill than if they had stayed married. Remarrying before the end of 2009 would raise their total tax bill about 50% compared to option 1.
Thank you for your analysis. It seemed to me that it was better for the low income to be the “custodial” parent, but then the HOH classification goes away for the high income parent, which seemed backwards. Since we lived together for 9 months of 2008 and split custody the remainder of the 3 months, I think the custodial parent could be considered either way.
Thanks again.
Credit for child care incurred is a big credit for me . I pay 60% of the daycare costs for the year per the court decree. As I set out doing my taxes it appears that due to a remarriage in ‘08 I am not able to take the Child care credits for 2 children. I have shared parenting 50/50 time – neither parent is the custodial parent. Of three children each parent claims a single (1) child a year alternating floating child # 3 every other years.
It appears the IRS considers my new spouse as built in childcare because she was not working. It is complicated because new spouse did not get a W-2 but a form 1099-G for unemployment benefits…and those are not considered earned income. The new spouse received unemployment benefits, documented looking for work but without a W2 to post for the year so then I lose the Child Care credit. That is a huge hit. I’m trying to work this a few different ways and its not working…any tips?
Can you please advise on the followng scenario?
Couple divorced in 2000. Two children involved, current ages 12 and 14 years old. Non custodial parent requesting custodial parent to sign Tax Form 8332 -for 14 year old child in order to file Taxes for 2008. Custodial parent refusing to sign the form. Custodial parent’s tax refund has been filed -it is assumed not claiming 14 year old child-. Are there any steps noncustodial parent needs to follow in order to be able to file 2008 tax claim on a timely manner? If so, what are they and who should be contacted?
Also, custodial parent has never agreed to sign Form 8332 for 14 year old child. -By doing so, it is assumed that custodial parent has tried to set presedent as of which child will be claimed once oldest child is non-claimable (18 years or highschool graduate). If this assuption is right, can custodial parent in deed keep claiming younger child for the two years after older child is non-claimable? Any recommendations as of ways to rectify this if at all possible?
Thank you in advance for your help!
please advise-
so even though my two kids, 7 & 9, stay with me 45% of the time, I provide a household for them, & pay all child care expenses, I cannot claim to be a head of household or write off the dependent care expenses? please confirm. so much for using the tax code to encourage positive behavior & personal responsibility. once again Washington talking out of both sides of their large mouths
son’s ex is living with someone, not working, she wants to claim one child as tax deduction on her “fellas” taxes. Can she do this?