The court has ruled joint “parenting time” or custody, with both you and your spouse spending approximately equal time with your child.
50/50 custody is usually the preferred solution for the Colorado divorce courts as it is seen as beneficial to the child for both parents to contribute equally to his or her upbringing.
However, this can create some confusion at tax time. Which parent claims for a dependent child on taxes?
Can you and your ex both claim for a child on your tax returns? Do you both receive equal exemptions?
It can be hard enough to file tax returns with only yourself to worry about after a recent divorce. Looking after a dependent child further complicates the process.
You must be careful to stay within the tax laws in Colorado but it can be very beneficial to claim for a child on taxes. The following should clear up any confusion and clarify what you can and can’t do.
Joint custody and claims
Typically, your Parenting Plan drafted by attorneys, or the Court order, will indicate who claims the child(ren) on their taxes and when. When you have a Parenting Plan or Court Order, this will trump the rules of the IRS as to which parent claims the child.
According to the IRS, the parent with custody for the greater part of the calendar year is eligible for the deduction – again, unless the court orders differently and the custodial parent signs the appropriate form: Release of Claim to Exemption for Child of Divorced or Separated Parents. If your Court order is silent as to taxes, and you are the custodial parent, it is typically advised that you should follow the IRS rules and claim the child(ren).
There is a simple way to go about self-assessing this:
- Have you spent more than 182 days with my children in the past (tax) year?
- Does your child sleep more often at your home than your ex-spouse’s home?
- Yes to both? You are considered the custodial parent in the eyes of the IRS
- No to both? You are NOT generally considered the custodial parent by the IRS
Note that the IRS does not recognize the terms “50/50 custody” or “joint custody” so don’t expect to find them on your tax forms.
According to the Colorado Courts, the issue of child tax credits/exemptions comes down to the financial contributions of each parent to the children. For example, a parent could conceivably have 0 overnights with the children and still have a right to claim the children on his or her taxes so long as they are significantly contributing financials.
Often, in the case of 50/50 custody and similar financial contribution from the parents, the court orders that the parents take turns in claiming for the child. So, one parent claims for the child one year and the other parent the next year.
If parents have 50/50 parenting time but one parent contributes significantly more financials, that parent may get to claim the child(ren) a greater percentage, for example 2 out of 3 years.
If there is more than one child, the court may divide the children between the parents for tax purposes, somewhat simplifying the process.
Tax claim status is an important issue that will usually be addressed by the judge during the divorce process. With changes in the federal tax law, such as the recent change from dependency exemptions to child tax credits, it is important that you have an attorney to help craft a Parenting Plan or Court order that will be very clear about taxes between the parents.
With emotions running high in divorce settlements, this matter often gets overlooked by the parents. However, it may have long-term implications on your finances so it is important to check the paperwork regarding tax claiming rights.
In a divorce action, the applicable tax information may be found in the separation agreement. If you are having trouble locating the relevant information, speak to your tax or divorce attorney before filing your next tax return.
It is important to understand that, regardless of the custody arrangement, both parents cannot claim for the same child on taxes in the same tax year. The IRS will be flagged if the child is claimed on two separate returns, causing more issues than anyone wants to be stuck dealing with.
Benefits of claiming dependents on taxes
Raising a child is always expensive. It doesn’t end with primary needs like feeding, clothing, healthcare, and schooling. There are extra costs for daycare, leisure activities, and so on.
Fortunately, the IRS provides parents with several tax exemptions and credits to assist with the expense of raising a child. This is particularly important for parents who are divorced and are responsible for raising a child.
For Colorado parents, you may be able to claim for the following common tax benefits (subject to the ever-so changing federal tax laws):
- Dependent Care Credit – for parents who must pay daycare or babysitting costs for children under 13 while they are working or looking for work
- Head of Household – for parents who pay for more than half of the household expenses and have at least one dependent
- Earned Income Tax Credit (EITC) – for parents with low-paying jobs who need to claim for earned income tax credit
- Child Tax Credit –for parents with a child of 16 years or younger and who need to claim for expenses beyond those permitted by the Dependent Care Credit benefit
- Dependent Exemption – for parents who:
- Provide more than half of their child’s expenses
- Have provided a place to live for their child for more than half the year, and
- Have a child under 19 at the end of the year (or under 24 and a full-time student)
Note that if your child is mentally disabled or in further education, your rights to claim for them as a dependent may be extended.
Unsure if you can claim for a child on taxes?
The dependent exemptions and credits for a custodial parent can be significant, so they are worth paying close attention to.
Note that the court and the IRS view custody differently and when filing tax returns, you need to abide by the IRS definitions of custody.
Tax rules are complex and many parents struggle to understand what they are entitled to, which can mean that they miss out on deduction and benefits or unwittingly break the tax rules.
If you’re worried about child custody and taxes, submit a free case evaluation to our attorneys or give us a call at 720.594.7360.