How Are Tax Credits Handled in a Divorce?

When divorced parents do their taxes for the first time after a split, certain things must be done differently. If the divorce was finalized on or before December 31, it is not possible to file a joint tax return for that tax year. The biggest point of contention is choosing which parent will claim the children as dependents because this allows the child tax credit and deductions for education expenses.

Custodial parents who claim children as dependents can also be eligible to claim child and dependent care credit and earned income credit. Divorced parents are not permitted to share the child tax credit for a single child, though. To qualify, the child must be younger than age 17 by the end of the tax year, must have lived with the parent for at least six months, and be receiving support from that parent. The head of the household is generally the custodial parent, who may or may not be named in the divorce agreement.

When one is not named, the IRS could make the determination based on which parent spent the most time with the child during the year. What if custody is split evenly? The IRS will usually award the status to the parent who has the higher adjusted gross income.

There are two main ways that divorced parents can file their taxes to make the child care tax credits more equitable:

• Taking turns: Divorced parents can claim the tax credit in alternating years, and this can be done through a verbal agreement. That could be hard to enforce when one person does not follow through, so it might be wiser to have it specified in the divorce agreement. The IRS Form 8332 is used for this, and waives all of the child tax credit. The noncustodial parent will receive the credit without needing to claim the child as a dependent. This can be filed every other year.
• More children, more tax credits: A parent can claim a tax credit for each child that meets the IRS requirements for dependents. As long as the child qualifies, each one can provide tax credit to one parent. This is easier when there is an even number of children.

Are There Any Other Tax Breaks for Divorced Parents?

If you were divorced or had a separation agreement in place before December 2018 and are paying alimony, you can usually deduct alimony. After that date, alimony cannot be deducted, and the receiving spouse does not have to pay taxes on it. You could also get a break if you were separated but not divorced until after December 31. It is also possible to file a separate return as head of the household and get a larger deduction as long as your dependent child was living with you for at least six months.

Some divorcing couples decide to file joint tax returns when the proceedings are not finalized by the end of the year, but this means that any refunds or money owed would have to be shared accordingly. You might also get a break if you are paying your child’s medical expenses after the divorce, but this needs to meet a certain amount in order to qualify.

Marlton Divorce Lawyers at Goldstein & Mignogna, P.A. Help Divorcing Parents

If you are seeking a divorce, speak with our Marlton divorce lawyers at Goldstein & Mignogna, P.A. For a confidential consultation, call us at 856-890-9400 or complete our online form. Located in Marlton, New Jersey, we serve clients in South Jersey, including Burlington County, Camden County, and Gloucester County.