One of the first questions a divorced father has to answer is whether he can file as a head of household. The answer to this question depends on whether he is the custodial parent. If so, he can retain the tax status of the head of household. However, if the ex-spouse is the custodial parent, they get this filing status advantage. If the two parents have joint custody and share expenses and time on a 50/50 basis, neither can claim to be the head of the household for tax purposes.
Let's look at how this works, and how divorced fathers can put themselves in the best tax situation possible.
Claiming a Child as a Dependent
Whether a divorced dad can claim a child as a dependent is determined by the circumstances. In general, you must meet all three of the following requirements to be considered a head of household and claim your child:
- You are unmarried (or considered unmarried for tax purposes).
- You paid more than 50% of the costs related to the upkeep of the home.
- The qualified dependent (in this case, your child) lived with you in the home for more than 50% of the year.
If your ex has sole legal custody of your child, then they are the one that can claim the child as a dependent. However, if you have joint custody and your child is with you for 50% of the year, you may still be able to claim the child as a dependent if you are the one paying child support or if you have a higher adjusted gross income.
It may be a good thing from a tax perspective for the parent with the higher income to claim the child. However, if that child is getting ready for college, they might get more financial aid by being dependent on the lower-income parent. You might want to take these special circumstances into account.
There is also an exception if there are multiple children. If the divorce agreement specifies that one child lives the majority of the time with one parent and another child lives most of the time with the other parent, both may be able to file as a head of household. If you want to take this route, make sure that the arrangement is included with appropriate language in the divorce decree or settlement agreement.
Parents can strike an agreement as to who claims the child as a dependent, and the IRS will honor that. Check with your tax advisor as to the terms needed in the agreement and the proper IRS forms to file.
Deducting Alimony and Child Support
Child support payments are not deductible on your tax returns. However, the situation is more complicated for alimony payments.
President Trump signed the Tax Cuts and Jobs Act (TCJA) into law in 2017, and this law effectively phases out alimony payment deductions. Any alimony or separate maintenance payment that was agreed upon after December 31, 2018, is not deductible. However, any payments related to a divorce or separation agreement that was struck before January 1, 2019, are still deductible.
If you were divorced in 2018 or earlier, but you modified your alimony payment agreements after December 31, 2018, then your payments may no longer be deductible.
Other Deductions Related to Children
Some childcare, healthcare, and school expenses can be deducted. Each parent can include the medical expenses they pay for the child—even if the other parent claims the child as their dependent—if all three of the following stipulations are met:
- The child is in the custody of one or both parents for more than half the year.
- The child receives over half of their support during the year from their parents.
- The child's parents are either divorced or legally separated under a decree of divorce or separate maintenance, separated under a written separation agreement, or live apart at all times during the last six months of the year.
You may also qualify for the tuition and fees deduction depending on your income and filing status, or you may qualify for the American Opportunity Tax Credit if you are paying college tuition and fees for your child. There is also the Lifetime Learning Credit, which is applied to qualified tuition and related expenses for students enrolled in eligible educational institutions (including job skills education).
Amounts vary based on expenses and income status, but it is worth checking these credits out if your children are in college.
Filing status is based on your status as of December 31 of the tax year in question. If your divorce was not final by the end of the year, you should consider a married filing jointly status for that year's taxes. Rates and tax policies are more favorable in that tax status.
Deducting Attorney's Fees
Generally, attorney's fees related to a divorce are not tax-deductible. However, some professional fees involved in preparing the settlement agreement may be. For example, fees you may pay for tax planning purposes related to the settlement may be deductible (if you itemize your deductions). If you had to pay fees to divide the assets in a qualified retirement plan, those may also be deductible. Generally, these kinds of fees fall into miscellaneous deductions and are deductible only when, in total, they exceed 2% of adjusted gross income.
Finding More Information
If you'd like more information regarding these issues, the IRS has two helpful publications on the topic. IRS Publication 504 Divorced or Separated Individuals and IRS Publication 503 Child and Dependent Care Expenses are very important for any divorced parent wondering how to properly file a tax return.
The information contained in this article is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. For current tax or legal advice, please consult with an accountant or an attorney.