Who Claims the Kids on Taxes After Divorce?

Divorce forces you to make hundreds of decisions at once: parenting plans, property division, and child support. In the middle of all that, it’s easy for the tax question to slip through the cracks, but it’s one worth paying close attention to.

At Fout Law Office, our lead attorney, Teresa Fout, has been guiding Ohio families through divorce since 2008. From property division to parenting plans to tax considerations, she helps clients think through every financial detail, not just the obvious ones, to achieve fair divorce outcomes.

Here’s what you need to know about claiming children on your taxes after divorce:

• The custodial parent usually claims the child.
• If both parents try to claim the child, it causes IRS delays.
• You can set your own agreement through your divorce settlement.
• An attorney can help you account for this financial benefit and protect your interests.

Why Does It Matter Which Parent Gets to Claim the Kids on Their Taxes?

Claiming a child as a dependent unlocks significant tax benefits, including the child tax credit, the additional child tax credit, and the credit for other dependents. These savings add up quickly. When you’re working out child support and property division, leaving the tax question unresolved creates a gap that can quietly skew the financial balance of your agreement.

A divorce settlement that looks fair on paper may not actually be fair once you account for who gets those tax advantages. Addressing it upfront saves both parties from a lot of frustration later.

What Are the IRS’s Rules for Claiming Dependents After Divorce?

When it comes to taxes after a divorce, the IRS is very clear: only one parent can claim a child in any given tax year. You cannot split the associated tax benefits, such as the Child Tax Credit, between two separate returns. The purpose of this rule is to prevent double-dipping on tax deductions and credits, which helps keep the tax system fair.

So, how does the IRS determine which parent has the right to claim the child? The primary rule revolves around custody. The “custodial parent”, defined by the IRS as the parent with whom the child lived for the greater number of nights during the year, is generally the one who gets to claim the dependent.

In situations where parenting time is split exactly 50/50, the IRS applies a “tie-breaker” rule. In this case, the parent with the higher adjusted gross income (AGI) for the tax year is granted the right to claim the child.

What Happens If Both Parents Claim the Same Child?

Since only one parent is legally entitled to claim the child, it’s not uncommon for disagreements to arise, leading both parents to attempt to claim the child on their respective tax returns. This can create significant complications for both parties:

• IRS intervention: When a child is claimed on two separate returns, the IRS system will automatically flag both. This triggers a review process to determine who has the rightful claim.
• Processing delays: Both parents can expect significant delays in receiving any potential refunds as the IRS works to resolve the discrepancy.
• Potential penalties: The parent who is found to have improperly claimed the child may face penalties and be required to pay back any resulting tax benefits, plus interest.

To avoid these issues, clear communication and a formal written agreement are essential before either parent files their taxes.

Can You Create Your Own Tax Agreement During Divorce?

Before you lose hope that you won’t get to claim your child on your taxes, it’s important to understand that you and your spouse are not locked into the default IRS rules. During your divorce, you and your spouse can structure child-related tax benefits in a way that feels fair to both parties.

Here are a few ways you can customize your agreement:

• Alternate years: One of the most common solutions is for parents to agree to take turns claiming the child each year. This means both parents receive the tax benefit over time.
• Split the children: If you have multiple children, you can agree to each claim a specific child every year. For example, one parent claims the oldest child, while the other parent claims the youngest.
• Release the claim with Form 8332: The custodial parent can formally release their claim using IRS Form 8332, which allows the noncustodial parent to claim the child for that tax year. This applies to the child tax credit and related benefits, though it does not transfer the earned income credit or dependent care credit.

Whatever you decide, it’s crucial to create a clear, legally binding agreement.

How Can an Attorney Help You Account for Taxes in Your Divorce?

Making sense of the tax implications of divorce can be complex, but the right legal guidance can make a significant difference. A family law attorney can assist you by:

• Drafting clear tax provisions: Incorporating specific tax-related clauses into your divorce settlement to prevent future ambiguity and disputes.
• Explaining IRS regulations: Walking you through the relevant IRS rules and clarifying how they apply to your unique custody and financial situation.
• Advocating for your financial interests: Negotiating a tax arrangement that accurately reflects your financial reality, rather than settling for a default outcome that may not be in your best interest.
• Preventing common errors: Helping you avoid mistakes that could lead to complications or scrutiny from the IRS in the future.

Make Sure Your Divorce Agreement Covers the Full Financial Picture

Divorce involves more than dividing property and establishing a parenting plan. Decisions about taxes, including who claims the children, can have a meaningful impact on your finances year after year.

If you are going through a divorce and want to be confident that every financial detail is accounted for, our team at Fout Law Office is here to help. Contact us today to get clear guidance as you move forward.