Divorce. It’s an ugly business. Not just in the emotional toll it takes on the couple calling it quits, but in time, money, other resources, and the rest of the family. You’re not just dividing household possessions and investment accounts. Who gets custody of the pets? Who gets custody of your friends? Who gets custody of the kids? Who gets custody of your life?
And even the IRS gets involved. The agency decides your tax filing status which is generally determined by your marital status on the last day of the year.
- If you’re separated but not legally separated or divorced at the end of the year the IRS considers you married for filing purposes until you get a final decree of divorce or separate maintenance.
- If you’re legally separated or divorced at the end of the year you must file as single for that tax year unless you’re eligible to file as head of household or you remarry by the end of the year.
- If you’re legally married at the end of the year, you must file as married for that tax year and choose one of these filing statuses.
- Married filing jointly: On a joint return, you report your combined income and deduct your combined allowable expenses. For many couples, filing jointly lowers their taxes. In some cases, you may be relieved from liability for taxes owed on a joint return through tax relief for spouses.
- Married filing separately: If you file separate tax returns, you report only your own income, deductions and credits on your individual return. You’re responsible only for the tax due on your return. You and your spouse should consider whether filing separately or jointly is better for you.
- Head of household: If you’re married or legally separated, one of you may be eligible to file as head of household if all of these apply:
- Your spouse didn’t live in your home for the last 6 months of the year
- You paid more than half the cost of keeping up your home for the year
- Your home was the main home of your dependent child for more than half the year
Claiming Dependents
But no matter your filing status, when kids are involved in a divorce, who gets to claim them and deduct them for tax purposes?
Only one parent is eligible to claim a child as a dependent. Generally, it’s the parent who has custody.
- The custodial parent is the parent with whom the child lived for a greater number of nights during the year. The other parent is the noncustodial parent.
- In most cases, because of the residency test, the custodial parent claims the child on their tax return.
- If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income.
If parents split custody 50-50 and aren’t filing a joint return, they have to decide which parent gets to claim the child. If the parents can’t agree, the IRS has tie-breaker rules.
Special rules apply for the noncustodial parent to claim a child on their tax return.
- The custodial parent can release the dependency exemption and sign a written declaration or Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent for the noncustodial parent to submit with their tax return.
- This also applies to some tax benefits, including the child tax credit, additional child tax credit, and credit for other dependents. It does not apply to other tax benefits, such as the earned income credit, dependent care credit, or head of household filing status.
The IRS has other resources that explain tax rules and regulations concerning divorce and child custody.
Publication 501, Dependents, Standard Deduction, and Filing Information
Publication 504, Divorced or Separated Individuals
Publication 596, Special Rule for Divorced or Separated Parents (or Parents Who Live Apart)
Whom May I Claim as a Dependent?
Disclaimer
This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice, or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors, all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investment Partners at 1-888-777-0970 or email us at [email protected].
