IRS Tiebreaker Rules for Claiming Dependents
Who claims a child in joint custody?
Although the Tax Cuts and Jobs Act did away with personal exemptions, at least until those rules are slated to sunset in 2025, having one or more dependents can open the door to numerous other tax breaks. Claiming a dependent can allow filers to take advantage of the head of household filing status, the Child Tax Credit, and the Child and Dependent Care Tax Credit.
Having dependents can also increase your Earned Income Tax Credit—if you're eligible. It's worth claiming them if you're entitled to, but the rules can be tricky in cases of joint custody or in the event of a dispute.
In general, the parent who has custody for the greater part of the year gets to claim the child as a dependent for tax purposes. If custody is split perfectly 50/50, then the parent with the higher adjusted gross income (AGI) gets to claim the child.
One Taxpayer per Dependent
Unfortunately, if you aren't a married couple filing jointly, only one taxpayer can claim each dependent. This affects those who might be divorced or those who never married their child's other parent. Internal Revenue Service (IRS) rules prohibit parents from effectively splitting their dependent down the middle; only one of them can claim the child.
Ideally, you can reach an agreement with the other parent as to which of you will claim the child. Otherwise, the IRS will apply certain tiebreaker rules to determine which parent has the right to claim the dependent.
Some parents with multiple children do "divide" them at tax time, perhaps with one parent claiming one child and the other parent claiming the other. This is perfectly acceptable to the IRS. Your children don't have to be a package deal for tax purposes.
In a tiebreaker involving only one parent, that parent will generally prevail among all other taxpayers and may claim the child as a dependent.
Right to Claim Depends on Custody Ratio
The first rule the IRS imposes is that the right to claim a dependent goes to the parent with whom the child spent the most nights during the tax year. This is typically the custodial parent.
For example, you would be entitled to claim your children if they spent 300 nights with you during the year and just 65 nights with your ex. In cases where two parents share physical custody, but the child resides with one parent more than 50% of the time, the parent with the greater percentage of parenting time is awarded the right to claim the child.
Of course, with 365 days in most years, an exact 50/50 split is usually impossible. Even in perfectly scheduled shared custody arrangements, one parent is likely to have the children for at least one more night than the other. The IRS would give the right to claim to that parent.
The Income Tiebreaker Rule
The parent with the higher AGI claims the child as a dependent in cases where the child lived with each parent exactly equally. This might be the case if the child lived with a grandparent or other relative for some time during the year, and the parents evenly divided the remaining time.
Likewise, the caregiver with the greater AGI becomes eligible to claim the child as a dependent when neither taxpayer is the parent. This rule only applies when no parent can claim the child, such as when grandparents, aunts, uncles, and other caregivers split custody of the child.
A parent who doesn't have the right to claim a child may attempt to do so anyway. It's best to seek the advice of a tax professional or attorney in this case.
If you know both you and an ex are going to claim your child as a dependent, ensure that you're eligible to claim your child. If you are, go ahead and claim the child as you file your taxes. However, be prepared to defend yourself in an audit.
If two taxpayers both attempt to claim the same dependent, the second one will be rejected. If they filed electronically, they'll simply be rejected online, and if they filed by mail, they'll receive a CP87C Notice. After that, they have three years to correct their return. If the child is left on both returns, the Internal Revenue Service will audit one or both taxpayers. All received tax returns are screened through an IRS computer to check for this and other red flags. The IRS will investigate the facts of the situation and award the dependent according to the tiebreaker rules.
A Qualifying Parent Can Waive the Right
Parents who are eligible to claim a dependent can opt to allow the other parent to do so instead by completing Form 8332, otherwise known as the Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. The parent claiming the child would then submit this signed form with their tax return.
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