Who Gets to Claim the Kids on Their Taxes?
The volume of details divorcing couples must address during negotiations can feel daunting. Custody, finances, and other issues may be resolved easily, or they may become hotly contested before any resolution occurs. One detail that people—especially those trying to represent themselves in a divorce—often forget about is who gets to claim the child or children on their income taxes. When the myriad of issues related to your divorce is swirling around you, taxes may seem like a small issue. But come tax time each year, you will likely think differently. Even small decisions can have a significant impact on your life going forward. Therefore, having the assistance and advocacy of an experienced family law attorney can ensure that you resolve all issues in the best way possible for you and your family.
Claiming Children on Your Taxes
There are a few different methods by which you can claim a child or children on your federal income taxes. In years past, adding a dependent meant an additional exemption on your taxes. However, the Tax Cuts and Jobs Act (TCJA) eliminated that exemption in 2018. The government partially compensated for this financial loss by nearly doubling the standard tax deduction. So essentially, claiming a child in 2022 won’t have the same beneficial impact on your taxes as it would have had before Congress enacted the TCJA. However, don’t despair. Parents may qualify for other benefits like the Child Tax Credit, the Additional Child Tax Credit, the Earned Income Credit, and more.
The Child Tax Credit
The new tax code initially increased the Child Tax Credit from $1,000 to $2,000 per child for the 2020 tax year. This amount will be increased to $3,600 for the 2021 tax year. As of the writing of this article, Congress is negotiating a possible extension of this higher credit past the 2021 tax year, but the outcome is currently unknown.
Additional Child Tax Credit
This is an additional tax credit above and beyond the Child Tax Credit and is available for lower-income parents who can claim a child as a dependent. This name can be misleading, as it seems to imply that you need “additional children”—or more than one—to get the credit. But that is untrue. You only need one child to qualify for this tax credit.
Earned Income Credit
This is available to working parents who have an annual earned income of under $55,952. The Earned Income Credit (EIC) requires you to meet specific income and other requirements. But if you qualify, it could give you more of a refund than you paid in taxes.
Child and Dependent Care Expenses
It may be possible to claim the child’s daycare or other expenses on your return. This is typically only for custodial parents who can demonstrate that the child lived with them for at least six months within the tax year.
Head of Household
This is a filing status designation that differs from “Single” or “Married Filing Separately.” Your tax rate is lower, and you have a higher standard deduction if you file as head of household.
As you can see, there are many paths you can take to receive tax benefits when you are supporting children. But since both parents cannot claim their children on their taxes, the question remains: Who gets to claim the child as a dependent when parents divorce?
Divorce Settlement or Court Order
In most cases, divorcing couples work out the issue of who gets to claim children as dependents during settlement negotiations. Working this and other matters out through negotiating, as opposed to litigating the issue in court, is best for most couples. During the negotiation phase, there is a lot of wiggle room for parents to decide how they want to handle child custody, child support, tax issues, and more. Going to a judge who does not intimately know you, your children, or your situation is the last resort for people who can’t work things out themselves. Ideally, divorcing parents can reasonably negotiate and find an answer that benefits both parents and their children.
Keep in mind that there is no set standard that applies here, and the non-custodial parent can equally benefit from a negotiated tax arrangement. For example, a couple with two children could exercise options such as:
One parent claims both children on odd number years and the other parent on even number years;
One parent claims one child, and the other parent claims the other child every year; or
One parent claims both children for a certain number of years; then the other parent claims them until they become independent.
And, of course, if the couple cannot reach an agreement, a judge can issue a court order that dictates who claims the children as dependents and when.
Determining Dependents without a Divorce Settlement or Court Order
If, for some reason, the issue of who can claim children as dependents is not determined by divorce settlement or court order, then IRS rules of determining dependency come into play. Essentially, these rules are as follows:
If the child lived with one parent during the year more than the other, then the parent where the child spent the most time gets to claim the child as a dependent.
If the child spent the same amount of time living with each parent, then the parent with the higher adjusted gross income (AGI) gets to claim the child.
If only one parent is the child’s biological parent, then that parent gets to claim the child.
If both parents try to claim the child as a dependent, then the first tax return received by the IRS is the one that is accepted.
Understandably, it is in the best interest of both parents to have this issue worked out during the divorce proceedings to avoid conflict later.
We Are Here to Help Work Out the Details
The attorneys at the Jarbath Peña Law Group are experienced at handling the details of a divorce should you decide that your marriage is no longer salvageable. A do-it-yourself option and self-representation leave far too many questions unanswered and could cost you an enormous amount both financially and emotionally in the future. Let us guide you through the process to make sure that details, such as who will claim the children as dependents on your income taxes, are not overlooked or decided unfairly. Of course, if you are already divorced and need help because your circumstances have changed, we can help by advising you and arguing a motion for a modification of your original divorce order.
Don’t leave details to chance! Call us today at 305-615-1005 or contact us through our online contact form. Let our staff of legal professionals use their years of experience to take care of the details of your divorce and protect your financial interests. Do not wait. Contact us today!