Who Gets to Claim a Child as a Dependent When You Share Custody?
In shared custody situations, parents may negotiate who claims the child as a dependent and takes child tax credits as part of the custody agreement.
Negotiating child custody arrangements can be complex. In addition to disputes over the actual amount of time you get to spend with your child, there are also numerous financial matters to decide. When it comes to raising children, every little bit counts and even relatively small amounts can help in providing what they need. It is not uncommon for child tax credits to become a point of contention between the parents. The following outlines who is entitled to take these credits and how they can be negotiated in your case.
Disputes over claiming children as dependents often arise between parents when custody is shared. Previously, the right to claim a child as a dependent meant that you could deduct as much as $4,050 from your taxable earnings, thereby lowering your overall tax debt. However, changes in the tax code under the Tax Cuts and Jobs Act (TCJA) eliminate personal exemptions in 2019 in favor of a standard deduction.
While taking this exemption may no longer be relevant, there are other tax credits available if your child is your dependent, which can save you considerable amounts of money. In addition to being able to claim ‘head of household’ status, you may also be entitled to the Child Tax Credit, the Child and Dependent Care Credit, and the Earned Income Tax Credit. Under Internal Revenue Service (IRS) guidelines, you may be entitled to these credits if any of the following is true:
The child resided in your home more than half the time during the previous year;
You provided more than 50% of the child’s financial support;
You have reached an agreement with the other parent, in which they waive their right to take the credit.
One of the ways to avoid disputes over child tax credits is to negotiate these rights as part of your overall child custody and support agreement. The Balance advises this is increasingly an option for couples who divide parenting duties on a fairly even basis.
It may also be an option in cases in which one parent has more income and assets than the other or contributes more financially to the child’s upbringing through child support payments. Using child tax credits as a negotiating tool can help you obtain a larger amount of support, with the trade-off being that taking tax credits can help offset these payments and reduce the other person’s overall tax liability.
When dealing with issues that have the potential to impact you and your child’s well being for years into the future, John Powell III, P.C. provides the trusted legal guidance you need. Contact our Pearland child custody attorney today and request a consultation to discuss the options in your case.