Child Custody: What Your Child Custody Arrangement Means for Your Tax Return

Now that the holidays are over, you may be ready to start your taxes. You’ve collected your W-2, 1099’s and other documents. You have last year’s tax form for guidance. But, if you’ve gotten divorced in the last year, this year’s taxes may be very different.

The U.S. tax code provides substantial tax breaks to families with children. These tax breaks are intended to offset the cost of raising a family. They include an exemption for each child, a child tax credit, and credits and deductions for education and childcare expenses. During your marriage, you and your family shared these tax breaks. But, after a divorce, the credits and deductions can no longer be shared.

In Pennsylvania, it is common for divorced parents to share custody of the children. Each parent contributes to the cost of raising the children. Since both you and your ex are paying the children’s expenses, it seems logical that you would both be able to claim an exemption. However, the tax code doesn’t work way.

The IRS permits only one parent to claim a child on their taxes. In most cases, the custodial parent gets the deduction. But, what happens if both parents share custody?

Under IRS rules, the parent with whom the child spends the most nights during the year is the custodial parent. If time is split equally between the parents, the parent with the highest adjusted gross income gets to claim the child on his or her taxes. But, this may not be the best solution for every family.

When there is more than one child, divorced parents have the option of splitting the deductions, so each parent gets tax benefits. To do this, the custodial parent must complete out IRS Form 8832. The deduction can be given up for one year or for multiple years. The non-custodial parent must attach a copy of the form to his or her income tax return in order to claim the deduction.

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.