Around 29% of divorcing parents tend to choose joint custody when deciding on child-related matters. It is a smart and mature decision, as kids will be able to have both parents in their lives. While such an agreement is beneficial for all parties involved, it may cause issues when it comes to tax responsibilities and implications.
The topic of “Who claims child on taxes with 50/50 custody” may be confusing and debatable. When adults can’t reach an agreement, they may resort to guidelines on 50/50 custody and child tax credit established by the Internal Revenue Service (IRS). However, going this way may delay a decision on tax payments. Therefore, it is worth trying to settle disputes amicably without third parties.
If you are looking for a comprehensible overview of child tax credit for divorced parents along with relevant tax rules, this article may come in handy. We have described the core features of joint custody in the USA, legal regulations for claiming a child on taxes, and possible scenarios when both parents want to get a child tax credit.
By reading the information below, you may come up with an informed decision beneficial for all family members involved.
How Does Joint Custody Work?
Joint custody is also called shared custody, referring to the situation when both parents have legal and physical custody of their kids.
- Legal custody implies the ability of parents to make decisions concerning a child’s life together.
- Physical custody is related to living arrangements, namely, where a child lives on a day-to-day basis.
When spouses choose a 50/50 custody arrangement, it means their kids spend equal time with both of them. There may be different schedules, but usually, parents decide on alternating weeks or splitting the week in half.
Joint custody is favorable for kids and parents. But it can complicate tax implications, especially when ex-spouses aren’t on the same page about which parent claims the child on taxes in their specific case.
Typically, it is almost impossible to maintain a true 50/50 custody. Since there are 365 days in a year, except a leap one, either mother or father will spend at least one more day and night with a child. The calculations will be 183 overnights with one parent and 182 overnights with the other. And when you ask, “How many overnights is 50/50 custody?”, the answer is 182.5. Arranging such equal schedules is rather difficult as there may appear various unpredictable situations, and one parent will spend a bit more time with a kid.
So, who claims a child on taxes with joint custody? In most cases, a parent who spends more time with a kid should do it. However, if parents manage to arrange their time and really spend equal time with a kid but can’t agree on who gets tax benefits, they should adhere to the IRS regulations, namely, evaluate adjusted gross income. In short, a parent with a higher AGI is eligible to claim certain tax benefits associated with the child. The law favors a higher-earning parent in this situation because they usually pay more taxes and can use a child tax credit as a sort of refund.
Can the Non-Custodial Parent Claim the Child on Taxes?
In fact, a non-custodial parent can file the papers and claim a child on taxes. Usually, when querying “Who claims child on taxes?”, we get the answer that a custodial parent is legally allowed to do so. What is a custodial parent for tax purposes? It is a primary caregiver. However, if the main caretaker fills out and signs the Release/Revocation of Release of Claim to Exemption for Child form, the second party can add it to their tax return and submit documents to the IRS for approval. Usually, the Internal Revenue Service ratifies such requests. The organization just needs either parent to claim a child on taxes, and it is great when parents can make the decision themselves.
Moreover, it happens that a custodial parent doesn’t qualify to receive child-related financial benefits after divorce or is eligible only for a part of them. It typically occurs if a main caregiver lives abroad for more than half a year or has a very high income. That’s when non-custodial parent claiming child on taxes is a logical solution. If a custodial parent can’t take full advantage of the available payments, the non-custodial parent can do it instead.
When talking about child-centered tax arrangements, it is crucial to focus on children’s needs. For instance, if a non-custodial parent earns much less than an ex-partner, letting them have a child tax credit may be advantageous for kids in the long run. With additional monetary support, they will be able to create a proper environment for children, satisfy their educational and recreational desires, etc.
So, does a non-custodial parent have the right to claim child on taxes? Yes, they do. The best-case scenario is when ex-spouses can negotiate this topic on their own and complete the Release/Revocation of Release of Claim to Exemption for Child form. Being understanding, empathic, and supportive, it is always possible to reach a mutually satisfying decision, especially if both parents prioritize children’s well-being and happiness.
Who Is Supposed to Claim Children as Dependents?
In accordance with the established IRS guidelines, a custodial parent who lives with a child on a permanent basis is supposed to claim a child as a dependent. Can both parents claim dependents when they agree to 50/50 custody? Once again, it is next to impossible to establish such schedules when a child spends equal time with each parent. Sometimes, it is the case if another relative occasionally takes care of a kid. For instance, if a child visits a grandmother on weekends for overnights, then parents can arrange equal physical custody.
If that is your situation and you want to reach a consensus peacefully, you may calculate how much money each of you spends on kids. Based on the figures, you can see who deserves to get tax benefits more. Of course, these are usually verbal agreements between spouses. If any of them violates the deal, the other party can’t legally punish them.
Another method to decide who claims dependents after divorce is to alternate years. For instance, one parent claims a child on taxes this year, and the other party will do so the next year. Naturally, the feasibility of this agreement depends on the honesty of each spouse.
As you see, the level of cooperation between parents plays a pivotal role in settling various disputes related to child custody and pertaining tax payments. When claiming dependents when separated or divorced, you should ensure you are eligible to do it. The main criteria are:
- You must be a taxpayer;
- You must have provided more than half of the child’s financial support during the tax year;
- Your gross income for the year must be less than $4,400 (the number changes based on the inflation);
- You must be a citizen, national, or resident alien of the United States, or a resident of Canada or Mexico;
- You must have lived with a child for more than half of the tax year.
Moreover, when claiming dependents after divorce, you have to make sure your child is a dependent in the eyes of the law. The basic characteristics are:
- A child must be the taxpayer’s child, stepchild, or foster child;
- A child must be under 19 or under 24 if they are a full-time student. Such rules don’t apply to a child who is permanently and totally disabled;
- A child must have lived with the taxpayer for no less than half a year with exceptions for temporary absences;
- A child must not cover more than half of their financial needs during a year;
- A child cannot be claimed as a dependent on another taxpayer’s tax return.
What Happens if Both Parents Claim the Same Child on Taxes?
Can two parents claim one child? Technically, they can but such requests will be rejected by the Internal Revenue Service. According to the law, only one parent can claim a child on taxes. Usually, this is a primary caregiver. In a 50/50 custody arrangement, partners can decide on their own who will get a child tax credit. There are several methods of resolving disputes.
For instance, if they have two kids, negotiations can be easier. Can divorced parents claim one child each? Absolutely, and this is probably a win-win option for both. If they have three kids, they can still claim one child each and claim the youngest baby by alternating years. This is a fair decision.
One more solution is to switch when declaring a child for tax purposes. If you are hesitant about whether parents can take turns claiming child taxes without breaking the IRS rules, don’t worry. Such arrangement is acceptable and typically doesn’t raise any concerns in revenue agents.
If parents aren’t willing to follow any of the listed options and both claim a child on taxes, the IRS will have to apply the TieBreaker Rules. Experts will determine which spouse is eligible to receive tax benefits by evaluating their:
- Relation to a kid
- The amount of time each parent has lived with a child
- Adjusted gross income.
If you want to speed up the process of tax calculations, it is advisable to come to terms with a spouse before filing papers. Sometimes, consulting with a tax attorney or financial advisor may help see working strategies.
