Divorce raises a lot of questions, one of which concerns which parent may claim the shared child as a dependent for tax-filing purposes. As a general rule, the custodial parent is the parent who may enjoy child-related tax breaks. However, there is an exception to this rule, which occurs when the custodial parent releases to the noncustodial parent the right to claim these tax breaks via the appropriate IRS form. This exception may prove to come in handy come tax-time for you and other noncustodial parents.
Requirements for the noncustodial parent rule
According to MarketWatch, there are four requirements you must meet to take advantage of the noncustodial parent rule. Those are as follows:
- Divorced or separation requirement: You and your child’s other parent must have a written divorce or separation agreement in place at the end of the year, or you must have lived apart for at least six months of the year.
- Support requirement: You and/or your child’s other parent must have provided over half of your child’s support for the year.
- Custody requirement: You and/or your child’s other parent must have had custody of your child for more than half of the year.
- Written requirement: Finally, you must receive a written declaration from the custodial parent that releases his or her right to claim child-related deductions and tax credits to you. This written requirement must come in the form of IRS form 8332.
Tax breaks that are available to both parents
If your ex-spouse signs IRS form 8332, you can take advantage of the various tax credits the IRS gives parents. Those include the tax credit for children under 17, which is a generous $2,000 per child; the smaller tax credit of $500 for each child over 16; and the student loan interest deduction. However, if you do not receive the right to claim your child, you can still benefit from other tax breaks. Those include itemized deductions for your child’s medical expenses, tax-free health savings account distributions put aside for your child’s medical expenses and tax-free employer-provided health care benefits for your child.
