When May the Noncustodial Parent Claim Tax Exemptions?

Under some circumstances, the noncustodial parent can claim a child as a dependent for tax purposes.
The Internal Revenue Code currently allows a deduction of $3,300 per dependent on federal income tax returns. These deductions are called "exemptions." According to IRC § 152(c)(3), dependents include your children, so long as they have not reached age 19 by the end of that tax year. If a child is a full-time student who has not reached age 24 by the end of the tax year, the child can also be claimed as a dependent.

What happens on divorce or separation? Many who pay child support believe that paying child support entitles them to claim a child as a dependent for tax purposes. This widely-held misconception simply is not true. The key fact to claiming a child as a dependent is whether the parent is the custodial parent. Ordinarily, custodial parents are the ones who are allowed to claim children as dependents, even when the noncustodial parent pays substantial amounts of child support.

IRC § 152(e)(1) sets out the general rule, which is that a child can be claimed as a dependent by the custodial parent. IRC § 152(e)(3)(A) says that "custodial parent" means "the parent with whom a child shared the same principal place of abode for the greater portion of the calendar year."

According to IRC § 152(e)(2)(A), there are two ways in which a noncustodial parent can claim a child as a dependent:

1. The custodial parent signs a Form 8332 ("Release of Claim to Exemption for Child of Divorced or Separated Parents") which the noncustodial parent attaches to his tax return; or

2. The divorce decree, separate maintenance or written separation agreement states that the noncustodial parent shall be entitled to claim a child as a dependent.

What happens if both parents claim the same dependent? The IRS has published what it calls the "Tie-Breaker Rule." Under this rule, the parent with whom the child lived for the longer period of time during the year is awarded the exemption. if the child lived with each parent the same amount of time during the year, then the parent with the higher adjusted gross income is awarded the exemption.

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