When parents of dependent children divorce there are many uncertainties including which parent qualifies to claim those dependent children. There are some general rules that apply and some special rules that oftentimes allow the parents to make that determination on their own. Here are the specifics on determining dependency status.
In general a parent is entitled to a dependency exemption for a child who was under the age of 19 at the close of the previous year or under the age of 24 and a full-time student if the child had the same primary residence as the parent for more than half of the year and the child did not provide more than half of his or her own support. If both parents can claim a child as dependent under these rules the exemption in most cases will go to the custodial parent or the parent with whom the child lived for the greater number of nights during the year. If the child resided with both parents for equal amounts of time the exemption then goes to the parent with the higher adjusted gross income.
There are special rules that apply in this situation to parents who:
- are divorced or legally separated under a decree of divorce or separate maintenance
- are separated under a written separation agreement
- lived apart in different residences at all times during the last six months of the year
If the parents combined to provide more than half of the child’s support for the year and the child was in the custody of one or both parents for more than half of the year the custodial parent can then release the exemption to the noncustodial parent allowing the parents to decide amongst themselves who will claim the exemption.
Release of the exemption by the custodial parent can be executed:
- on an annual basis
- for more than one year in the future (alternate years) or
- for all future years
Form 8332 is provided by the IRS for this purpose however a custodial parent may also grant the release by executing a document that conforms to Form 8332.
In many cases the custodial parent is receiving child support or alimony payments from the other parent and that custodial parent may prefer to grant the release specifically on an annual basis so that he or she can refuse to do so if the other parent is delinquent in making payments. If circumstances change the IRS provides a revocation of the release which can be granted for future years.
To grant release the custodial parent must complete and sign Form 8332 (a conforming document) and present it to the non-custodial parent. A copy of the completed form must be attached to the non-custodial parent’s return for each year that the parent is claiming the exemption.
Be sure to include the social security numbers of both parents on the release along with the social security numbers of any children whom you claim as dependents. It is also important to submit those social security numbers to Lindemeyer CPA as well when preparing for taxes because without those social security numbers the IRS can disallow the exemptions and immediately assess the tax against you.
Using a decree or agreement as release. Any divorce decree or separation agreement that went into effect after 2008 cannot be used as a release in place of Form 8332. The non-custodial parent must attach Form 8332 or a similar statement that was signed by the custodial parent specifically for the purpose of releasing a claim to exemption.
For parents who have a divorce decree or separation agreement that was executed and in effect before 2009 the non-custodial parent may attach pages from his or her divorce decree or separation instead of attaching a release on Form 8332 to the return but is only permitted to do so if the decree or agreement states:
- that the custodial parent won’t claim the child as a dependent
- that the non-custodial parent can claim the child as a dependent without regard to any condition such as payment of support and
- the years for which the non-custodial parent can claim the child as dependent
To use the decree or agreement in place of a release the non-custodial parent must attach to his or her return copies of:
- the cover page (write the other parent’s social security number on the page)
- the pages that contain the information and
- the signature page with the other parent’s signature and the date of the agreement
Divorce decrees and separation agreements often do not contain all of the details the IRS requires. So non-custodial parents who plan to take the dependency exemption should probably obtain an executed Form 8332 for all tax years in which they intend to take the dependency exemption.
Revoking a release. A release may be revoked by a custodial parent that he or she previously made on Form 8332 or a similar statement. Use Part III on Form 8332 for this purpose. The custodial parent must attach a copy of the revocation to his or her return for each year that he or she claims the child as dependent as a result of the revocation.
Revocations become effective the year after the custodial parent gives notice of his or her intention to revoke a release to the non-custodial parent. So if the custodial parent provided or made reasonable efforts to provide written notification of the revocation to the non-custodial parent in 2013 the revocation will be effective no earlier than 2014.
Planning considerations. From a tax perspective it makes sense to arrange for the parent who will save more tax from the exemption to be allowed to claim it. The tax savings from the exemption can then be shared. Of course where relations are strained it may be difficult to coordinate this planning.
Because this is a complicated process and many factors are involved it is best to entrust the help of a tax firm that can sort out the details and discover the best course of action for your specific case. Lindemeyer CPA is here to help you understand the tax laws surrounding claiming dependant childrent in a divorce. To talk to one of our tax professionals contact us today.