Who Claims a Child on Taxes When There Is Shared Custody?

A divorce turns one household into two, but when it comes to filing taxes, both divorced parents cannot claim their children as dependents during the same tax year. Under the IRS’s “One taxpayer, one dependent” law, when divorced parents file their taxes separately, only one parent can claim their child as a dependent per tax year.

Child custody issues are often the most hotly contentious aspects of a divorce. Unfortunately, adversarial points of contention often continue even after divorced spouses resolve their disputes through an agreement or in court—particularly during tax season.

Which Parent Claims a Child on Their Taxes If They Share Custody?

According to the IRS rules for divorced parents, the following standard is in place for claiming children as dependants:

“The custodial parent is the parent with whom the child lived for the 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.”

In cases of shared child custody, disputes sometimes arise between divorced parents because the 365 days in a year cannot be split exactly 50/50. Typically, the parent with 183 custody days or more in a year files the taxes for that year; however, parents who share their children very close to 50/50, may agree on specific terms in their settlement agreement. For instance, if parents have two children, they may each claim one child. They can also agree to each claim their children every other year. Alternatively, some parents agree that the parent with the higher gross income claims the children as dependents.

What Are IRS “Tiebreaker Rules” for Parents With Shared Child Custody?

Claiming dependents provides advantageous tax benefits like earned income credit and the child tax credit. Under the IRS’s suggested tiebreaker rules, parents with shared custody who cannot come to a mutual agreement on which parent claims their child in any given year may apply the following guidelines:

• The parent with the most overnight custody days has a right to claim the child as a dependent
• If the children spend equal overnight with each parent, the parent with the higher adjusted gross income can claim the children as dependents
• If one parent is entitled to claim the children on their taxes due to either of the above but chooses to allow the other parent to claim them instead, they may sign over the right to claim them through the IRS Form 8332

When parents have questions or disputes over which one can claim their children, it’s best to speak to an child custody lawyer in Fort Collins.

Signing a Divorce Agreement With Tax Terms

During the divorce process, many spouses with shared custody negotiate the terms of a divorce settlement agreement, including child custody, the division of their assets and debts, and spousal support. A Fort Collins family law attorney represents their client’s best interests during these negotiations. A settlement agreement can include terms for claiming the children on their taxes. Many spouses choose to alternate years, or one spouse agrees that the other may claim the children in exchange for deducting the amount from their spousal support payments. When both spouses agree on terms, the judge signs them into binding orders.