It is officially tax season which means many parents are going to be busy figuring out if they can write off their children's extracurricular activities or even claim their kid as dependents in hopes of getting a little bit extra cash back. This only gets more complicated when a couple is divorced but shares joint custody of their children because both parents aren't each able to claim their kids on their tax return.
There are many tax benefits that come with claiming your child as a dependent, such as tax credits for the child and income credits, which means that both parents may benefit from claiming their child as a dependent. But as Go Banking Rates explains, only one parent may claim their child.
The bottom line is the parent who is the primary custodial parent gets to claim their child as a dependent. That means as long as your child spends at least 51% of their time living with you, you get to claim them.
But if you have a joint custody situation where the child truly spends 50% of their time equally with both parents, there may be an argument about who gets to claim the child.
While there is a tiebreaker rule to determine who gets to claim the child should the divorced parents not be able to agree on who gets to claim the children, Go Banking Rates has a few suggestions to help parents decide. The site suggests that parents alternate years when it comes to tax claims, or, if a couple shares custody of more than one child they can opt to split the dependents for taxation purposes.
In a perfect world, divorced parents would be able to come to an agreement as to who gets to claim the child in a joint custody situation, however there are rules in place to make that determination should the parents not be able to come to an agreement. While the custodial parent (the parent whom the child lives with more than 50% of the time) is entitled to claim the child as their dependent, in a case of a true, 50/50 joint custody situation, income decides who, in the end, will reap the tax benefit. Hence the 'tiebreaker rule.'
The Balance writes that the parent who has the "greater adjusted gross income" will get to claim the child as a dependent if both parents truly share joint custody. This rule only comes in to play if a divorced couple hasn't stipulated any other agreement in their divorce documents. Basically the parent who makes the most gets to benefit from the tax claim.
Everyone likes to benefit from a tax claim, which makes this an important area to cover when discussing a divorce agreement. Determining ahead of time which parent will get to list the child as a dependent in a divorce agreement and having it included in that agreement can save confusion and arguments during tax time and avoid any parties forgetting a verbal agreement or deciding it no longer works for them.
Go Banking Rates also offers some other informative tax tips for single parents that can help explain various tax credits that single filers and heads of households are potentially eligible to apply for.
It's important that both parents agree on who is claiming the children before they both inadvertently add their children to their tax claim, which as Romper explains, could cause a whole of problems, both legally and financially for both parties involved.
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