For years, in the wake of a divorce, the custodial parent (what we now call the primary residential parent) always got to claim the child for tax purposes. In fact, IRS guidelines still state that if the child resides in one parent's home for more than half the year, that parent gets to claim the child.
However, that has changed and the rule in Kentucky has been for several years that the trial court can allocate who gets to claim the child for tax purposes. The IRS will require that the primary residential parent sign IRS Form 8332 and also require the non-residential parent to attach a copy of the order from the trial court to his/her tax return. If the court has specified when/how the the child will be claimed in succeeding years (i.e. alternating or even/odd years), the IRS may not make you supply these documents in succeeding years.
Things get a little more complicated when there is more than one child. In that situation, courts have used a few different options. Sometimes, judges will order the parties to alternate claiming all of the children just like they may do if there was only one child. Another, and more common option, is for the court to allow one parent to claim one (or multiple children) and the other parent to claim the other(s). When there is an odd number of children, three for example, the court will often say one parent claims one child, the other parent claims the one child, and the parties alternate claiming the third child.
An entirely different wrinkle occurs where there is a wide disparity in the relative incomes of the parties. In that instance, it is usually a good idea to do an analysis of the relative benefits of claiming the children as a basis to argue to the court how the exemption should be allocated. Some judges use a "70% rule of thumb" where if one party makes seventy percent or more of the gross parental income, that party will get to claim the child(ren).
Something to keep in mind is that whatever manner the court chooses to allocate claiming the children, it is not set in stone. Most courts treat the allocation of claiming children in the same vein as child support. In other words, it is modifiable upon a showing of a substantial change in circumstances. This could be as simple as one child gets to the age that the parents can no longer claim him/her for tax purposes or as significant as one spouse losing or changing jobs.
Photo courtesy of Chris Tolworthy
Labels: child tax dependency exemption, dependent, tax claims, tax return, taxes