The end of the year is coming, and that means tax season is just around the corner. Even when life was simpler, you probably struggled to make sure you avoided penalties and paid no more than your fair share. When you had a child, your tax situation gained additional complexities, and now that you and the child’s other parent are not together, you may have many questions about what the government expects of you at tax time.
If you are a non-custodial parent who pays child support, you probably want to know if any deductions or credits apply to you. There are several ways to save money on your tax bill by taking the credits for which you are eligible. However, claiming dependents or deductions when you do not qualify for them can be a mistake that will cost you in the long run.
Claiming dependents on your taxes
If you have physical custody of your child and the child sleeps in your home more nights than in the home of the other parent, you can probably claim that child as your dependent. However, if a family court has given physical custody to the other parent, you may think it is only fair that you claim the child as your dependent, especially if you are paying child support. Unfortunately, this is not true. Your child support payments do not qualify you to claim the child on your taxes.
However, if you have joint custody, the solution may not be so clear. You and the other parent may have to work out some agreement for who gets to claim the child on his or her taxes — for example, alternating years for claiming the child. If you have more than one child, each of you could claim different children as your dependents. It is wise to have this agreement spelled out in your divorce decree.
Tax breaks and other questions
Certain tax benefits, such as the child tax credit and the child and dependent care credit, apply only to custodial parents. However, either parent may claim the earned-income credit if their income and other factors qualify. If you do not have physical custody of the child, you will have to ask the custodial parent to complete a Form 8332, allowing you to claim the credit.
As you can see, the complexities and nuances of tax law can be overwhelming, particularly when you and the other parent of your child are filing separate returns. Addressing these issues in your separation, divorce or custody agreements may relieve some of the stress during tax time.