Only one person can claim the same dependent on their tax return, but this doesn't mean that parents can't both claim certain tax breaks that are associated with their child dependent. The custodial parent must agree to the arrangement and effectively sign off on it.
- Only one parent can claim their child as a dependent, but both may still be able to take advantage of some other dependent-related tax breaks.
- The IRS has tiebreaker rules when parents can't agree on which of them gets to claim their child. The custodial parent has the first right.
- The custodial parent is the one with whom the child lived with the most nights out of the tax year.
- A custodial parent can relinquish the right to claim their child, giving it to the other parent, signing Form 8332 so the other parent can submit it with their tax return.
Deciding the Custodial Parent
The IRS defines a custodial parent as the parent the child lives with for the greater number of nights during the year. The custodial parent is determined using the tiebreaker tests for qualifying children if the child lives with both parents for an equal amount of time. The IRS will award the dependent to the parent with the higher adjusted gross income (AGI) when that is the case.
Tax Breaks for Custodial Parents
Only the custodial parent is generally eligible to claim certain tax breaks for having a qualifying child, including the following:
- Head of household filing status
- Child tax credit
- Earned income tax credit
- Exclusion for dependent care benefits
Parents can claim the Earned Income Tax Credit without a child dependent if they meet the other requirements. The credit is less in this case, but the American Rescue Plan Act temporarily increased it to $1,502 for tax year 2021. Unfortunately, this is a one-year-only provision. It's expected to drop back to $543 in 2022 unless Congress renews it.
The custodial parent used to be able to claim a personal exemption for the child as well, but these exemptions were eliminated from the tax code in 2018 under the terms of the Tax Cuts and Jobs Act (TCJA).
Personal exemptions are not necessarily gone forever, but they most likely won't return at least until the TCJA potentially expires at the end of 2025. Congress must take steps to renew the law or at least provisions of it at that time, or they will no longer be in effect.
Waiving Custodial Parent Rights
The custodial parent can waive their right to claim their child as a dependent, effectively giving the dependent to the noncustodial parent. The noncustodial parent would then be able to claim the child tax credit, the tuition and fees deduction, and either of the education tax credits.
The custodial parent would still be eligible to claim some child-related tax benefits, even if they release their claim to the dependent. These include head of household filing status, the child and dependent care credit, the earned income credit, and the exclusion for dependent care benefits.
How to Split Child Tax Benefits
You must meet four criteria to "split" your child and divide tax benefits between parents. These include:
- You must be divorced, legally separated, or have lived apart at all times during the last six months of the year.
- You must have provided more than half of the dependent child's total financial support. The child must be in the custody of one or both parents during the year.
- The child must not have lived with anyone other than a parent for more than six months of the tax year.
- The custodial parent must officially waive their right by signing IRS Form 8332.
The custodial parent can waive their right to claim the dependent by signing Form 8332 to the IRS. The claiming parent must then include the form with their tax return when they file it. They might submit one of a handful of other documents as well, but custodial parents are strongly advised to use Form 8332. Other documents, such as divorce decrees, separation agreements, and child custody agreements, don't always provide the same level of detail as Form 8332.
The noncustodial parent should attach the signed Form 8332 to their tax return. The custodial parent should keep copies of the form as well.
Waivers aren't necessarily permanent. Part I of Form 8332 only releases a parent's claim to the child for the current tax year. Part II releases the right in future tax years, and you can identify and specify these years. Finally, a parent may resubmit Form 8332, completing Part III to revoke a release that they've already granted if they change their mind. Noncustodial parents should review whether they can claim a dependent each year.
Tax Benefits for Higher Education
Only the parent claiming the child as a dependent would be eligible to claim the tax breaks for college and other post-secondary education. These include:
These tax deductions and credits aren't available to people whose filing status is married filing separately. They're subject to income phaseout limitations. Parents might want to forgo claiming the child as a dependent, allowing the child to claim these tax breaks themselves if neither of them can do so.
Two taxpayers shouldn't attempt to claim the same dependent without filing Form 8332. It would almost certainly trigger an IRS audit of both tax returns. The IRS is aggressive in denying dependents and other child-related tax breaks when that form is missing.
This sharing of child-related tax benefits is available only to taxpayers who are the child's parents. Splitting the dependent's tax benefits with other family members isn't permissible.
Frequently Asked Questions (FAQs)
How much is the Child Tax Credit worth?
The maximum amount you can get from the Child Tax Credit is $3,600 per child under the age of 6 and $3,000 per child from age 6 to age 17, but these figures apply only to the 2021 tax year as provided for by the American Rescue Plan Act. They're expected to revert to $2,000 in tax year 2022. There are income limits to receive the full amount. Families who earn higher levels of income will receive lower tax credits or none at all.
What are the tiebreaker rules for claiming qualifying children?
Only one taxpayer can claim a single dependent, so the IRS has issued rules for deciding who can claim the child. They're referred to as "tiebreaker rules." The parent who has the child more during the year is usually the one who may claim that child as a dependent. The parent with the higher adjusted gross income would claim the dependent if custody is exactly 50/50.
What happens if both parents claim the dependent on their tax return and submit it to the IRS?
Their tax returns will both be rejected if both parents submit them claiming the same child. One or both parents will then have to amend their returns. The IRS will audit one or both parties if neither act to make the appropriate change.