In situations where parents have joint custody of a child, determining who can claim the child on their taxes can be complex.

Today, we’ll discuss the tax implications of child custody. There are two different types of custody in Michigan, physical and legal custody. This distinction is important when filing your taxes and claiming a child tax credit.

What Does The IRS Say About Claiming a Child Tax Credit When You Have Joint Custody?

The custodial parent can choose to release their claim to the child’s dependency exemption to the non-custodial parent by signing IRS Form 8332, “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.” This form allows the non-custodial parent to claim the child as a dependent.

When we say “custodial parent” we are referring to the parent that has the majority of overnights or primary physical custody of the child. So if your child’s primary residence is your home, then you are the custodial parent in the eyes of the IRS and can either claim the child tax credit or file IRS Form 8832 to allow your child’s other parent to claim your child as a dependent.

Many parents choose to alternate this credit every year. This can either be an informal agreement or outlined in a child custody agreement. This will often depend on the nature of you and the other parent’s relationship and whether or not you can be civil when it comes to co-parenting and whether or not the agreement is in line with rules, especially with regard to Form 8332.

What If A Child Spends An Equal Number Of Overnights With Each Parent?

If the child spent an equal number of nights with each parent, the IRS applies tie-breaker rules. The first rule is that the parent with the higher adjusted gross income (AGI) gets to claim the child.

Claiming Your Child As A Dependent

Only one parent may claim your child as a dependent, but other tax credits can be claimed by the other parent, so long as they meet all of the requirements set forward by the IRS. Some of these credits include:

• Earned Income Tax Credit (EITC): The child must be your son, daughter, stepchild, foster child, or a descendant of any of them (such as grandchildren). The child must also have lived with the claimant in the United States for a period of no less than 6 months in the tax year.
• Child Tax Credit (CTC): The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (e.g., your grandchild, niece, or nephew). The child must be under 17 years old at the end of the tax year, and have lived with you for more than half of the year.

Best Practices For Claiming A Child When You Have Joint Custody

There are some better and worse ways to go about dealing with taxes when you have joint custody of your child. Some tips to make the process smoother include:

• Communicate with your child’s other parent: Discuss and come to an agreement of how to handle claiming your child with their other parent. Often it helps to have this agreement in writing, but can be done verbally if you are civil with one another.
• Consult a tax professional: While a family law attorney can offer some general guidance, it is always best to speak with a professional that specializes in taxes. They can help you make the right decisions and advise you on how to stay on the IRS’s good side.
• Honesty is the best policy: While you most likely will not know what your child’s other parent is doing on their 1040, you should always abide by the IRS’s rules. If you do not, you can be penalized or even charged criminally for fraud.

Do you have questions about child custody, or need the assistance of a dedicated family law expert? Then contact The Mitten Law Firm today.