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Tax Season and Divorce: Who Claims the Children?

NOTE AND DISCLAIMER: This is not intended to be a complete description or explanation of the law governing the claiming of child tax exemptions in the State of Utah.  This posting is intended to give a litigant some information, but by no means all of the information, pertaining to child tax exemptions.  Do not rely on this page alone for information on this issue; consult with an attorney personally. This page does not create an attorney-client relationship.

As you will see below, the question as to tax exemptions—in regards to children—is one that many divorcing persons (and their attorneys) have, and rightly so.  While there are many places to go if you have questions, I would suggest http://www.irs.gov/publications/p504/ar02.html as a starting point as you figure out how your circumstances affect your tax situation.

What follows is a typical divorce child tax exemption question:

Dear Eric:

I have a question for you.  A temporary order has been entered in my client’s divorce case.  Under the temporary order, my client is the non-custodial parent, but s/he is current on child support.  The temporary order does not address the issue of claiming children of the marriage as dependents for tax exemption purposes.  Opposing counsel is arguing that because s/he his client is the physical custodian, s/he is entitled to claim all the child tax exemptions.

Thank you!

In answering this question:

• I assume that the minor children in question are children born of the marriage or adopted by the divorcing couple (not step-children, for example);

• I assume that the question applied prospectively;

• I assume that there is no prior existing order dealing with who claims the child tax exemption;

• I assume that the child(ren) lived for the greater number of nights during the year with the custodial parent.
• I assume that the minor children lived with one or both parents more than half the tax year in question, and I assume that separation did not take place before 1985 (IRS Publication 504(4)(b)).

The Utah Code (§ 78B-12-217) provides that no presumption exists as to which parent should be awarded the right to claim a child or children as exemptions for federal and state income tax purposes and unless otherwise stipulated in writing, the court shall award any final order on a case-by-case basis.  While the Utah Code makes no presumption as to which parent should be awarded the right to claim a child or children as exemptions for federal and state income tax purposes, the Internal Revenue Service does make presumptions.

According to IRS Publication 504, a non-custodial parent can claim a child tax exemption if all of four of the following conditions are met:

1) the parents have to be divorced or separated;

The  parents have three ways to prove they meet this requirement:

a)  Parents are divorced or legally separated under a decree of divorce or separate maintenance,

b)  Parents are separated under a written separation agreement, or

c)  Parents lived apart at all times during the last 6 months of the year, whether or not they are or were married.

2) The child received over half of his or her support for the year from the parents.

3) The child was in custody of one or both of its parents for more than half the year (this means that it doesn’t matter whether the child was in the custody of the non-custodial parent more than half the year for the non-custodial parent to qualify to claim the tax exemption, it means that the child only had to be in the custody of one or both of its parents for more than half the year); and

4) The custodial parent must sign either a Form 8332 (click here for a copy) or a similar statement. The only purpose of said statement must be to release the custodial parent’s claim to the child’s exemption. The noncustodial parent must attach a copy to his or her return. The form or statement must release the custodial parent’s claim to the child without any conditions. For example, the release must not depend on the noncustodial parent paying support.  The noncustodial parent must attach the required information even if it was filed with a return in an earlier year.

Bottom Line:

According to IRS rules, a non-custodial parent cannot claim the child tax exemption(s) without the written consent of the custodial parent.  However, the court can order a custodial parent to share the child tax exemptions and order the custodial parent to sign either a Form 8332 or a similar statement to accomplish that objective.  So to ensure the parents both receive the child tax exemption benefits during the pendency of a divorce action and subsequent to entry of the decree of divorce, make sure that your court orders contain such a provision.

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