KIM & ASSOCIATES PA·WEDNESDAY, MARCH 9, 2016
As a taxpayer, you are generally entitled to a personal exemption of any of your children for whom you provide more than 50% of the support during the tax year. However, if you and the child’s other parent are divorced or separated, different rules apply.
In general, in such a case, if the parents together provide more than 50% of the child’s support, then the parent who had custody of the child for the greater part of the year is entitled to the exemption for the child. This is true even if the noncustodial parent provided the greater part of the support. This rule applies where at year-end the parents are either divorced, legally separated, separated under a written separation agreement, or have been living apart at all times during the last six months of the year.
There are two ways to avoid this general rule if you are the noncustodial parent, but each requires the cooperation of the custodial parent. First, the custodial parent may waive his or her right to the exemption by filling out Form 8332 “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent” and giving it to the noncustodial parent. The noncustodial parent will attach this form or similar statement to his or her tax return and thus will be able to claim the exemption for the child. This release of the exemption will also allow the noncustodial parent to claim the child tax credit and the additional child tax credit (if either applies). Second, you may enter into a multiple support agreement with the custodial parent, which can assign the exemption to the noncustodial parent. In such cases, the noncustodial parent must still provide at least 10% of the child’s support. Such agreements are useful where the parents have joint custody of the child and it is unclear who is entitled to the deduction under the regular rules.
The allocation of a child’s personal exemption must be carefully considered in preparing any divorce or separation agreement. We advise you consult with a CPA, in addition to an attorney, if have questions about tax implications of a divorce and a custody agreement.