If you're filing for divorce, tax season might be the last thing on your mind. But, you'll need to think about it at some point, especially when it comes to who can legally deduct the kids. You might think that the parent who has legal custody automatically gets this deduction, but the truth is that there are some tests to make sure that the right parent gets this deduction. This guide explains what these tests are and options for splitting the deduction.
Test 1: Length of Time at Your Home
Keep track of how much time the children live in your home. If it is more than 50%, then you are likely the winner of the tax deduction, which in 2013, lowered adjusted gross incomes by $3,900.
Note: The odds of children spending an even amount of time at each parent's house are slim. Because of school and extra-curricular activities, one parent is normally the main caregiver, and as such pays the most for the care of that child.
Special Circumstances: If the child lives in one home more than 50% of the year, but the other parent pays more for their support than the custodial parent, then the parents can fill out a special form that gives the paying parent the right to claim the child.
Test 2: Age of the Child
Typically, the Internal Revenue Service (IRS) considers any child under the age of 19, or 24 if enrolled in college, to be your dependent even though they have officially turned 18.
Test 3: Income of the Child
If your child has a job but you still provide more than 50% of their living expenses, then you can still claim them as a dependent. If your older child is working, but you still pay the utilities, rent, food and other types of support, they can file their own taxes but they cannot claim themselves as a dependent.
Dependent Deduction Division
If there is a desire to split the dependent deduction, you can alternate the years, where one parent claims the deduction one year and the other claims it the next. If there are multiple children involved, then split the deductions each year by claiming one or more of the kids, while the other parent claims the other half.
Decide during your divorce negotiations who will claim the children as dependents on their tax return. Remember that each child can only show up on one tax return as a deduction. If you think that you aren't getting a fair deal, or if your spouse has claimed the deduction in error, contact your lawyer to inquire about what the next steps should be.
For more information about tax policy in the event of a divorce, speak with a firm such as Bauer & Associates LTD.
Share3 December 2014
While I took a few business classes in college, I left early to start my own business. I thought I had the knowledge I needed to become a great business owner and was eager to start my business. Soon, I had a new business that was actually performing pretty well in sales. Unfortunately, I hadn't taken any law courses in college, and I soon realized I made a few mistakes when starting my business that could cause me some legal trouble. Thankfully, a great business lawyer helped me correct my mistakes before I had any legal problems, but I then decided to take those business law courses. I want to help business owners and anyone else who would like to learn more about the law by starting a blog where I will share what I have learned and will continue to learn. I hope I can help you!