Child Dependency Exemption in Divorce

There are numerous tax issues that may arise as a result of divorce. It is highly recommended that clients seek the advice of a qualified CPA regarding taxable events pursuant to a divorce. The purpose of this article is to address commonly asked questions regarding the child dependency exemption.

Can my former spouse and I both claim the same child as a dependent on our U.S. Income Tax Return?

You cannot file a joint tax return with your former spouse for a tax year in which you were not married for the entire year. Your marital status is determined on the last day of the tax year. Thus, if you were divorced on December 31, 2010 you are required to file as single for 2010 and you must file a separate tax return. In a tax year in which the parties may have been physically separated but not yet divorced, the potential of filing a joint tax return may still exist. Likewise, the parties may elect to file as married filing separately. If filing separately, both parents cannot claim the same child as a dependency exemption on their U.S. Income Tax Return. The dependency exemption for a child will be awarded to the parent who has physical custody of the child for the greater number of overnights during the calendar year. If the child spends an equal amount of time with both parents, the parent with the higher adjusted gross income will be allowed to claim the dependency exemption provided the child is otherwise eligible to be claimed as a dependent. In order to satisfy the Internal Revenue Service’s regulations for a qualifying dependent child, the child must meet four requirements: (1) the child must be designated as a child of the taxpayer; (2) the child must not have reached the age of 19 during the calendar year or must be enrolled as a full-time student and not reached the age of 24 during the calendar year; (3) the child must have the same principle place of abode as the taxpayer for more than one half of the year; and (4) the child must not have provided more than one half of his or her own support for the year.

I have weekly visitation with my child and pay monthly child support to my former spouse, can I claim my child as a dependency exemption on my U.S Income Tax Return?

The only way a noncustodial parent may claim a child as a dependency exemption is if the custodial parent has signed IRS Form 8332 (make this a link to the form). The mandatory order of child support form in Washington State includes a provision that requires the parents to sign the federal income tax dependency exemption waiver. For tax years starting after 2008, the noncustodial parent can claim the exemption for a child only if the custodial parent formally releases the exemption via IRS Form 8332. The child still must meet the IRS qualifications of a dependent. Since the waiver does not have to be permanent and can be revoked at a later date by the custodial parent, it is important to ensure the final order of child support requires the custodial parent to sign the dependency exemption waiver for the years that the exemption is awarded to the noncustodial parent. A copy of the waiver must be attached to the noncustodial parent’s annual tax return. For court orders entered prior to 2009, the noncustodial parent may claim the dependency exemption only if the order states all of the following: (1) the noncustodial parent can claim the child as a dependent without regard to any condition (e.g. payment of support); (2) the other parent will not claim the child; and (3) the years for which the claim is released.

It should be noted that the parent who is awarded the dependency exemption for a child is also eligible to claim the child tax credit, medical expenses for the child, and the dependent care credit. The dependency exemption and credits are subject to the IRS phase out rules based on income.