Claiming a Child for Tax Purposes
Having the ability to claim a “qualifying child” may give a taxpayer several tax benefits, such as head of household filing status, the exemption for a dependent, the child tax credit, the child and dependent care credit and the earned income tax credit. Claiming a child for tax purposes can have significant value. The 2017 Tax Cuts and Jobs Act doubled the maximum child tax credit from $1,000 to $2,000 per child under age 17 and added a $500 nonrefundable credit for children ineligible for the $2,000 credit.
The IRS has specific tests to determine if a child is a qualifying child.
A child may be a dependent of only one taxpayer for a given tax year. In other words, divorced parents may not claim the same child for the same tax year.
Generally, the child will be treated as the qualifying child of the custodial parent.
Parents can agree, or family court judges can order, that the noncustodial parent may claim the child as a dependent and as a qualifying child for the child tax credit. Appellate courts have held that the right to claim a child as a dependent for tax purposes is a modifiable child support issue and that judges have jurisdiction to allocate the federal income tax dependency exemption for children. A judge can order a custodial parent to sign IRS Form 8332 to permit the noncustodial parent to claim a child for a given tax year.
However, even in those circumstances, IRS rules will not permit a noncustodial parent to claim
head of household filing status
the earned income credit
the credit for child and dependent care expenses
the exclusion for dependent care benefits
or the health coverage tax credit.
Claiming a child is a child support issue. Under tax laws, child support is not taxed as income, and it is not a deductible expense for the child support obligor. If the parent who receives child support also gets to claim the child every year, that parent effectively receives a “windfall” by having all of the tax benefits related to the child (receiving both non-taxable child support and the child dependency exemption). So in both joint custody and sole custody cases, even where the child support obligor has limited visitation, courts often allocate the dependency exemption on an alternating basis so that at least every other year, the person ordered to pay child support receives at least part of the tax benefit for the child they are supporting.
There is an exception: when the child support obligor is seriously behind on child support or does not pay altogether, that parent may not be permitted to claim the child for income tax purposes. It would not be fair to allow a nonpayer to claim a child that they are not supporting when the other parent has had to go for months without any child support, and it would not be fair for a nonpayer to fail to pay support then get a tax refund from the child they were not supporting, even if the tax refund goes toward child support. In many cases, courts require the noncustodial parent to be current on child support by the end of the tax year, or the noncustodial parent will lose the ability to claim the child for that tax year.
