Claiming a dependent deduction for a child can lead to huge tax savings – a standard deduction per dependent is $4,050 each. Dependency status also determines whether you can claim additional deductions for costs such as child care and college tuition.
It’s easy to see why, after a divorce, both parents would want to claim their child as a dependent. However, according to the Internal Revenue Service (IRS) “a dependency exemption for a child may not be split between two or more taxpayers.”
So when you’re divorced, separated, or even married filing separately, who gets the deduction? Here’s how to sort out the IRS dependent deduction rules when you and your ex-spouse are both trying to claim it.
Figure out who claims the dependent deduction
With the complicated financial and familial arrangements of divorce, it’s not always clear who gets what. Among these disagreements and difficulties, deciding which parent can claim the dependent deduction can be a contentious issue. Thankfully, the tax code has specific guidelines to govern this issue.
Here are three questions to ask as you figure out if you can claim your child as a dependent.
1. Who is the custodial parent?
“Generally, the child is the qualifying child of the custodial parent,” according to the IRS. A custodial parent:
- Has sole or full custody of the child.
- Or has the child living with them “for the longer period of time during the year” (for joint or shared custody arrangements).
The amount of time each parent has a child is counted by the number of nights the parent was with or supervising the child. Therefore, if your ex had your child most of the time, you usually can’t claim a dependent deduction for that child.
However, if you had the child more — even if it was 183 nights to their 182 — you are the custodial parent for the tax year.
2. Do you and your ex have an agreement for claiming exemptions?
Many states require a divorce decree to include a statement of how the parents can claim dependent exemptions. Some standard agreements include:
- The noncustodial parent who earns more and provides significant financial support to the custodial parent might save more on their taxes if they get the exemption.
- Exes might agree to each claim different children as dependents each year.
- Parents with joint custody might alternate who gets to claim a dependent exemption each year.
- To do so, they should alternate their physical custody agreement. The parent planning to claim the child must meet the guidelines for custodial parent (has the child for at least 183 nights of the year).
Sticking to divorce decrees or informal agreements is important if you want to keep the relationship on good terms and treat everyone fairly.
3. Has the custodial parent signed a release for their claim on the dependent?
However, divorce decrees or agreements aren’t enforceable. The IRS follows federal law for dependent deductions, and won’t honor informal agreements or state divorce decrees.
So when divorced parents each file tax returns with competing claims for a dependent, the dependency exemption reverts to the custodial parent.
If you have an agreement for the noncustodial parent to claim the dependent on their tax return, you’ll need to make it official by doing the following:
- The custodial parent must sign IRS Form 8332 “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.” In doing so, they give up their legal claim to the dependency exemption.
- The noncustodial parent must attach a copy of the signed Form 8332 to their tax return at filing.
What happens when two returns claim the same dependent?
Here’s what you can expect if you and your ex file competing claims to a dependency deduction.
1. IRS rejects e-file returns listing already-claimed dependents
Your tax return requires you to list the dependent’s name, Social Security, and relation to you. When you submit the return, the IRS e-file system will check your dependents against returns already in its system.
If you’re trying to claim the same dependent who was claimed on a different return, you’ll get an e-file rejection. Even if you are legally entitled to the dependency exemption for your child, you won’t be able to e-file.
Because of this, if you plan to claim your child as a dependent and are worried someone else might also try to claim him, try to file your return early in the tax season.
2. File your return by mail or remove your dependent
If your e-file was rejected due to a competing dependency claim, there are two outcomes:
- You realize you claimed the dependent in error. Remove the child as a dependent from your tax return, and you’ll be able to e-file.
- You’re certain you have the right to claim your child as a dependent. Complete a paper tax return claiming the dependent and file it by mail.
3. Provide proof of the dependency claim
If you and your ex both claimed your child, the IRS will sort out who’s eligible to get the dependency deduction. Gather records, timelines, and other information that you can use to show you are the custodial parent.
If you’re the noncustodial parent, you’ll need a signed “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent” form to prove you can claim this exemption.
Mail all of this information in with your paper tax returns. It will help the IRS quickly sort through which filer qualifies for the dependent exemption.
4. If you’re in the wrong, file an amended return
The IRS will process both returns and issue refunds per the claims. However, both filers will eventually get letters indicating there is a conflict in their dependency claims.
The IRS will ask you to revisit the issue and amend your return if you wrongly claimed a dependent child. If you know you’re in the right, no action is required on your part. But if you claimed your child in error, you will need to file an amended return removing your dependent claim.
5. The IRS decides who gets the dependent deduction
Should neither party file an amended return, the IRS will determine which parent can claim the child.
After the IRS makes a decision, the filer who wrongly claimed the dependent deduction will have to return any taxes owed without this exemption, as well as fees and interest on the amount owed.
Ultimately, figuring out who can claim a dependent is pretty straightforward. Communicate with your ex, and you can (hopefully!) work out between you who will claim your dependent. When that’s not an option, just be honest on your tax returns — the IRS will sort it out correctly in the end.