Can Divorced Parents Claim One Child Each on Their Taxes?

Determining which parent can claim a child on their taxes after a divorce is an important consideration for many families. This decision significantly affects tax liabilities and benefits, making it crucial for divorced parents to understand the rules.

Eligibility Rules for Claiming a Child

Determining which parent can claim a child on their taxes requires meeting specific eligibility criteria outlined by tax regulations. These rules ensure that benefits go to the parent who meets certain responsibilities regarding the child’s welfare and financial support.

Relationship Criteria

The relationship criterion establishes eligibility to claim a child as a dependent. Under the Internal Revenue Code (IRC) section 152, a parent must have a qualifying relationship with the child, such as being a biological, adopted, foster, or step-parent. This rule also applies to certain relatives like siblings or grandparents. Parents should maintain documentation, such as birth certificates or adoption papers, to confirm their relationship with the child.

Age Criteria

The child must meet specific age requirements, as detailed in IRC section 152(c)(3). To qualify as a dependent, the child must be under 19 at the end of the tax year or under 24 if they are a full-time student. A child who is permanently and totally disabled can be claimed regardless of age. Parents should keep records of educational enrollment and disability status to ensure compliance with these rules.

Financial Support Criteria

The financial support criterion requires that the child not provide more than half of their own financial support during the tax year, as specified in IRC section 152(d)(1)(C). Parents should account for all sources of the child’s income, including scholarships and part-time work, to determine eligibility. Notably, child support payments are not considered when calculating the child’s support. Documentation of financial contributions is essential to substantiate claims.

Residency and Physical Custody Requirements

The IRS requires that a child live with the parent for more than half of the tax year to be claimed as a dependent, as outlined in IRS Publication 501. Time spent in the parent’s household is a critical factor, reflecting their caregiving role.

Physical custody encompasses the child’s living conditions, schooling, and community involvement. Custody agreements often influence the eligibility to claim a child. Parents should keep records such as school enrollment documents and healthcare records to verify residency. If custody is split equally, the IRS applies a tiebreaker rule, favoring the parent with the higher adjusted gross income (AGI). Parents are encouraged to communicate and establish an agreement to avoid disputes or audits.

Tiebreaker Factors for Divorced Parents

When both parents meet the criteria to claim a child, the IRS uses specific tiebreaker rules to determine who has the right to the claim.

Physical Custody Priority

The primary tiebreaker is physical custody, granting the right to the parent with whom the child resides for the greater number of nights during the tax year. For example, if the child spends 183 nights with Parent A and 182 nights with Parent B, Parent A can claim the child. Parents should track overnight stays using custody logs or calendars. Temporary absences, such as vacations or hospital stays, typically count as time with the custodial parent if the child returns to the same household.

Higher Adjusted Gross Income

If physical custody is evenly split, the parent with the higher AGI has the right to claim the child, as outlined in IRS Publication 501. AGI includes taxable income sources such as wages and dividends, minus specific deductions. Understanding AGI allows parents to anticipate outcomes and plan accordingly.

Resolving Equal Custody Situations

If physical custody and AGI are equal, parents may negotiate an agreement to alternate claims annually or designate one parent through a legal agreement. A written agreement, possibly prepared with a tax professional or attorney, can formalize these arrangements. This approach helps avoid IRS disputes and ensures compliance with tax regulations.

Tax Credits Tied to Dependent Status

Tax credits associated with claiming a dependent can significantly reduce tax liability. The Child Tax Credit (CTC) allows eligible parents to claim up to $2,000 per qualifying child, with $1,500 refundable as of 2023. This means parents can receive a portion of the credit as a refund even if their tax liability is reduced to zero.

The Additional Child Tax Credit (ACTC) benefits those who do not qualify for the full CTC due to limited tax liability. Additionally, the Earned Income Tax Credit (EITC) supports low to moderate-income working parents, with maximum credits exceeding $6,500 for families with three or more children. Understanding these credits helps parents optimize their tax benefits.

Documentation and Filing Requirements

Accurate documentation and filing are essential when claiming a child as a dependent, particularly for divorced parents. The IRS emphasizes the importance of substantiating claims, and failure to provide adequate documentation can result in audits or disallowance of tax benefits.

Parents should retain documents verifying their relationship with the child, such as birth certificates, adoption papers, or court orders. Proof of residency, including school records, medical bills, or lease agreements, is equally important. For parents who alternate claims, a signed Form 8332, “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent,” is often required. This form allows the custodial parent to release the claim to the noncustodial parent for a specific year.

Entering the dependent’s Social Security Number (SSN) correctly on the tax return is critical to avoid delays or rejections. Parents should review all entries and consider using tax preparation software or consulting a professional to minimize errors. Reviewing divorce decrees or custody agreements is also prudent to ensure compliance with any tax-related provisions. By maintaining thorough documentation and adhering to IRS guidelines, parents can maximize tax benefits and avoid complications.