Allocation of Child Tax Exemptions for Divorced Parents

Allocation of Child Tax Exemptions for Divorced Parents

In establishing custody and child support, a court has authority to allocate the tax exemption for children of divorced parents. The tax exemption may also be negotiated and agreed upon by the parties.

Federal Tax Law

The federal government has adopted special rules for divorced or legally separated parents. A tax deduction is available for the child provided the parents provided more than half of the child’s support and the child is in the custody of the parents, or either of them, for more than one-half of the year. The tax deduction cannot be split. The parent who has custody is entitled to claim the child unless the custodial parent signs a Form 8332, which releases the claim for a deduction to the noncustodial spouse. The form can generally release the deduction for all years, for one calendar year, or for any number of future years. The form also permits the parents to identify the child or children covered by the release.

Agreement of the Parties

The parents, in deciding custody and child support issues, may agree in writing that both parents shall have the right to claim the deduction for the child or children of the parties. The agreement may provide which parent has the right to claim the deduction for the child on his or her tax returns and for which years. When there are several children, the number of children claimed by each may vary from year to year. If there are two children, the parents may agree that each parent may claim one child. Where there are three, perhaps each will claim one child and the parents may alternate the third. In some instances, where one parent is paying substantially more than one-half of the support, the parents may agree that the parent who is paying the most is entitled to the tax deduction. Any agreement in writing made by the parents, when the Form 8332 is signed, will be honored by the Internal Revenue Service.

Tribunal Allocation

In the absence of an agreement between the parents, the judge or administrative officer who determines child custody and child support has the discretion of allocating which parent may claim which child and for what years. If the custodial parent refuses to sign the Form 8332 to allow the noncustodial parent to claim the child or children, the custodial parent may be held in contempt.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.