Can a Noncustodial Parent Claim the Dependent Deduction?

January 2, 2014

Do you intend to claim your child as a dependent even though you are not the custodial parent? While you may provide more than one-half the support for the child, you are not automatically entitled to claim the dependent deduction and credits.

In a recent Tax Court decision, TC Memo 2013-280, the petitioner maintained he was entitled to the dependency deduction because he and his ex-wife had shared legal custody and the children visited him frequently. The divorce decree awarded the ex-wife full physical custody and was silent as to who claims the dependent deductions. The court denied the petitioner’s claim.

By default, the dependency deduction and various related credits are the exclusive benefits of the spouse who has physical custody for the majority of the year. A custodial parent is the parent with whom the child spends the most nights with. In order for the non-custodial spouse to claim the exemption, the custodial spouse must sign an exemption release, IRS Form 8332, and provide that to the non-custodial spouse. This form then must be filed with the non-custodial spouse’s tax return.

Oftentimes, the tax aspects of divorce are not as well thought out as they should be, given various tax issues that only manifest themselves after the deal is inked. By that time it is very difficult, if not impossible, to revisit the divorce agreement. Involving a tax advisor early in the negotiation process is the best way to avoid surprises.

Contact Aprio’s Individual and Family Tax Services team today to connect with an experienced advisor. 
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