50/50 Custody: Who Claims the Child on Taxes?
Understand IRS rules for claiming children on taxes with 50/50 custody. Navigate shared parenting tax benefits and avoid common pitfalls.
Determining the Custodial Parent
The Internal Revenue Service (IRS) defines the “custodial parent” for tax purposes as the parent with whom the child lived for the greater number of nights during the tax year. This definition applies regardless of any divorce decree or other court order. A night is considered spent with a parent if the child sleeps at that parent’s home. Temporary absences for medical care, education, or vacation count as nights the child lived with the parent from whose home they were temporarily absent.
In situations where a child lives with each parent for an exactly equal number of nights, tie-breaker rules apply. The IRS specifies that the parent with the higher adjusted gross income (AGI) is generally considered the custodial parent for tax purposes. This rule ensures a clear determination even when physical custody is perfectly split.
The IRS’s definition of a custodial parent is solely for federal tax purposes and may differ from state laws or court-ordered custody arrangements. A parent designated as primary custodial by a state court might not qualify under IRS rules if the child spends more nights with the other parent. This distinction is fundamental to correctly applying tax laws related to dependents.
Releasing the Claim to the Noncustodial Parent
A custodial parent can allow the noncustodial parent to claim certain tax benefits for the child. This is done using IRS Form 8332, “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.”
Form 8332 permits the noncustodial parent to claim the child for the Child Tax Credit, Credit for Other Dependents, and Additional Child Tax Credit. It requires names, Social Security numbers of both parents and the child, and specifies the tax year(s) for which the claim is released. This clarity helps prevent disputes and ensures proper tax filing.
The custodial parent must sign Form 8332. The noncustodial parent must attach a copy of the signed form to their federal income tax return for each year they claim the child. Failure to attach the form can result in the IRS disallowing the claim, leading to potential delays or adjustments to the tax return.
Form 8332 is available from the IRS website, ensuring they use the most current version.
Tax Benefits Linked to Claiming a Child
Claiming a qualifying child on a tax return can unlock several valuable tax credits and deductions, significantly reducing a taxpayer’s liability. The Child Tax Credit (CTC) provides up to $2,000 per qualifying child. A portion may be refundable as the Additional Child Tax Credit, meaning taxpayers could receive it as a refund even if they owe no tax.
The Credit for Other Dependents offers a nonrefundable credit of up to $500 for children not qualifying for the CTC or for other dependents. This credit applies to individuals meeting dependency tests but not eligible for the CTC, providing some tax relief.
The Earned Income Tax Credit (EITC) benefits low-to moderate-income working individuals and families. While the EITC amount varies based on income and family size, it can be substantial. Eligibility for the EITC based on a qualifying child generally requires the individual to be the custodial parent by IRS definition, regardless of any Form 8332 release.
The Child and Dependent Care Credit helps offset expenses for a qualifying child’s care, allowing the parent to work or look for work. This credit is also typically claimed by the custodial parent. The Head of Household filing status, offering a more favorable tax bracket and higher standard deduction, generally requires the taxpayer to be the custodial parent and provide more than half the cost of maintaining a home for the child.
Navigating 50/50 Custody Tax Scenarios
When parents share 50/50 custody, deciding who claims the child for tax purposes requires careful consideration. Since the IRS tie-breaker rule assigns the claim to the parent with the higher adjusted gross income, parents often make a mutual agreement. A common arrangement involves alternating years, where one parent claims the child in even-numbered tax years and the other claims in odd-numbered years.
A clear, written agreement between parents regarding who claims the child is advisable, even if not legally binding on the IRS. This document helps prevent misunderstandings and disputes, outlining which parent claims the child and for which tax benefits. It serves as a valuable record of their mutual decision.
If both parents claim the same child, the IRS’s automated systems will flag duplicate claims. This usually results in a notice to both parents, potentially leading to an audit or requiring amended returns, and incurring penalties or interest.
With multiple children in 50/50 custody, parents have additional options. They might agree that each parent claims specific children every year, or alternate claiming all children, or even alternate individual children each year.