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Don't get caught up in a tax nightmare claiming exemptions

Parents who are split up often argue over which one gets to claim the kids on their taxes. Below is some basic information from the Internal Revenue Service regarding the Earned Income Tax Credit.

In most circumstances, the noncustodial parent cannot claim the exemptions for dependent care credit and dependency while the parent with whom the child(ren) lives claims the EITC. It usually works out that one parent claims all tax benefits that are available for a child.

However, there are exceptions when parents live apart due to divorce or other reasons for the final half of the tax year in question. A special rule allows noncustodial parents to claim dependency exemptions as long as the child(ren)'s custodial parent agrees to release that exemption.

Additionally, if other requirements have been met for the tax credit for the child(ren), then the parent without custody is permitted to claim the credit.

But the custodial parent is the only one who is permitted to claim the credit for dependent care. As such, only custodial parents meet the qualifications under most circumstances to claim the EITC. This is because there are residency requirements that must be met to claim the credit, although temporary absences are permitted.

You may wonder how all of this is calculated. If a child sleeps in the home of one parent more nights over the year than the other, that parent is said to be the custodial parent for purposes of claiming tax deductions. It also applies if the parent was the one who maintained responsibility for the child during the night, even if he or she slept elsewhere, i.e., overnights with friends, boarding school, hospital stays, etc.

Because tax laws are often quite confusing, some parents delineate in their divorce judgment which parent will claim the child. Some alternate years, while others with multiple children agree to claim one or more and let the other parent claim any additional offspring.

Your family law attorney can draft your judgment to reflect your wishes.

Source: IRS.gov, "Divorced and Separated Parents," accessed Feb. 12, 2016

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