Can Two Taxpayers Claim the Same Dependent?
Splitting the tax benefits of dependents between two taxpayers
The way the tax laws are written, only one person can claim a dependent on their tax return. However, two parents may be able to both claim tax breaks associated with a child, provided the custodial parent agrees.
Generally, only the custodial parent is eligible to claim the following tax breaks:
However, the custodial parent can waive his or her right to claim a dependent in favor of the non-custodial parent. The non-custodial parent would then be able to claim:
- the dependent's personal exemption,
- child tax credit and additional child tax credit, and
- tuition and fees deduction or the education tax credits
Even after releasing the claim to a dependent, the custodial parent would still be eligible to claim the following child-related tax benefits:
- head of household filing status
- child and dependent care tax credit
- earned income credit, and
- exclusion for dependent care benefits
How to Split the Child Tax Benefits
In order to split the tax benefits related to a dependent, the following four criteria must be met:
- The parents are divorced, or legally separated, or lived apart at all times in the last six months of the year;
- The parents provided over half of the dependent child's total financial support;
- The child is in the custody of one or both parents during the year; and
- The custodial parent waives his or her right to claim the dependent using Form 8332 or a substantially similar document.
The custodial parent is highly advised to execute Form 8332 to release his or her claim to the dependent's exemption. Other documents such as divorce decrees, separation agreements, and child custody agreements may not provide the same level of detail as Form 8332. It's advisable to always prepare Form 8332 when parents agree on splitting the tax benefits for a particular dependent.
Form 8332 must be given to the non-custodial parent, who will then attach this form to his or her tax return. The custodial parent should keep copies of the form as well.
Claiming the Tax Benefits for Higher Education
Only the parent who is claiming the child as a dependent would be eligible to claim the tax benefits for college and other post-secondary education. These tax breaks include the tuition and fees deduction, Hope credit, American Opportunity credit, and the Lifetime Learning credit. However, these tax deductions and credits are not available for people whose filing status is married filing separately. Additionally, these deductions and credits are subject to income phase-out limitations. If neither of the parents can claim these tax breaks, they may want to forgo claiming their child as a dependent, thereby allowing the child to claim these tax breaks for herself.
Cautions when Splitting the Child-Related Tax Benefits
Two taxpayers should not attempt to claim the same dependent. This will trigger an automatic IRS audit of both tax returns.
The noncustodial parent should always attach Form 8332 to his or her tax return to claim the tax benefits related to the child. The IRS is aggressive in denying dependents and other child-related tax breaks when this form is missing.
Custodial parents can revoke their waiver. Noncustodial parents should carefully review each year whether they can claim a dependent.
This sharing of the child-related tax benefits is available only to taxpayers who are the child's parents. Splitting of the dependent's tax benefits is not available to other family members.
Who're the Custodial and Noncustodial Parents?
The custodial parent is the person who is eligible to claim the dependent. Usually, this is the parent with whom the child lives for more than half the year. If the child lives with both parents for more than half the year, then the custodial parent is determined using the tie-breaker tests for qualifying children.
The noncustodial parent is the other parent. In other words, the parent who is not eligible to claim the dependent, unless the custodial parent waives his or her right to claim the dependent.