It’s uncommon for child custody to have a perfect 50/50 split, but many co-parents strive for equal time with their children, which can be a beneficial arrangement. However, when it comes to tax time, things might get a bit confusing.
Typically, a child qualifies for a significant tax credit. When you’re married, claiming dependents is simpler because you can file jointly. In the case of divorce, each parent files separately, raising questions about where the child tax credit should go.
For divorced parents sharing custody equally, here’s what you need to know about claiming the child on your tax return.
Who Can Claim a Child as a Dependent?
To claim a child as a dependent, the IRS has two tests: the Qualifying Relative Test and the Qualifying Child Test. For the child to qualify, they must be younger than you and under 19 years old. However, there’s no upper age limit for children who are totally and permanently disabled or meet the relative test.
A qualifying relative is someone who lived with you the entire year but isn’t a qualifying parent. They also need to meet income thresholds, and you must have supported them for more than 50% of the year.
If parents file separate tax returns, they have two options:
- Use IRS tiebreakers to determine who can claim the child.
- Agree with the other parent on who is entitled to claim the child as a dependent.
Who Claims a Child on Taxes With 50/50 Custody?
According to IRS regulations, the parent who has physical custody of a child for the majority of the year is entitled to claim the child as a dependent. This can create a challenge when there’s a 50/50 split in custody, as parents can’t divide the claim for tax purposes. The IRS uses a tiebreaker to determine which parent can claim the dependent.
In a full 365-day calendar year, the parent with the child the longest gets the right to claim the dependent. This rule applies regardless of whether parents are separated, divorced, or unmarried.
However, what if the child spends exactly 182.5 days with each parent?
In such a scenario, the IRS applies a second rule, giving precedence to the parent with the higher Adjusted Gross Income (AGI). This means the IRS may change the parent entitled to claim the child.
Consider a situation where you and the other parent share custody equally. In 2021, you had a higher AGI, allowing you to claim the child. However, if the other parent receives a promotion in 2020, increasing their AGI by $20,000, and the custody agreement remains the same, they would be eligible to claim the child as a dependent under IRS tiebreaker rules.
Parents Can Decide Who Will Claim a Child on Tax Returns
IRS rules have been established to ensure fair tax filing for parents with 50/50 custody. When parents share equal custody, they can decide who claims the child as a dependent. Often, parents agree to alternate claiming the child, with one parent doing so in even years and the other in odd years. If you both have the same number of children, an agreement can be made to claim each other’s half on tax returns, and this arrangement can be specified in a divorce or separation decree.
Another option is to let the parent who contributes more financially towards the child’s upbringing claim the child as a dependent. This financial contribution might include expenses for extracurricular activities or medical care. It’s advisable to have this agreement in writing to avoid misunderstandings.
To formalize these arrangements, Form 8332 can be filled out. This form allows the custodial parent to release or revoke the right to claim a child as a dependent. If the custodial parent completes this form, the noncustodial parent can claim the child. However, it’s important to note that the child cannot be claimed for Head of Household Filing Status or any other child-related credit based on this form.
What Happens If Both Parents Claim the Same Child on Taxes?
Both parents have the option to claim the same child on their tax returns. However, issues may arise if one parent makes this decision without consulting the other, especially if there’s a disagreement about who has the right to claim the child.
If both parents claim the same dependent, the IRS may automatically reject one or both of the returns, particularly when filing electronically. Parents who file paper tax returns will receive a notice from the IRS, indicating that their return has been flagged.
To rectify this mistake, the parent who made the error needs to amend their return and submit it again. Non-compliance may prompt the IRS to audit the returns of one or both parents. In such cases, tiebreaker rules are employed to determine which parent genuinely has the right to claim the child as a dependent.
To avoid this situation, it’s recommended to consult with professionals such as tax attorneys, or advisors. If agreement between the parents is elusive, seeking guidance from these experts can help clarify who is entitled to claim the child under IRS rules.
It’s important to steer clear of such complications, as an IRS audit can be time-consuming and stressful. Seeking professional advice can provide valuable assistance in resolving disputes and ensuring compliance with tax regulations.
The Bottom Line
Deciding who gets to claim a child for taxes in a 50/50 custody situation can be challenging if you’re not familiar with IRS rules. Negotiating with the other parent to claim dependents is an option, but it’s not always straightforward. To prevent an audit, it’s crucial to align with the tax code and ensure you’re on the right side of the rules.
Find Your Peaceful Solution with Us
Dealing with child tax credits when you and your ex-partner share custody equally can seem tough, but it doesn’t have to be. At Successful Solution, we’re here to help you figure out the best way to handle tax time without stress. We know all about the rules for divorced parents and how to make agreements work smoothly.
Our goal is to help you and your ex-partner agree on who gets to claim your child on tax returns, so you can avoid any trouble with the IRS. With our help, you can make these decisions easily and fairly, keeping things peaceful and straightforward.
Contact Successful Solution now, and let’s make tax season easier for you.