Does child custody affect a divorced parent’s taxes?

If you went through the divorce process in 2014, then you probably faced a lot of questions to which you might not have had the answers. That’s because you, like most of our New Jersey readers, may only have basic family law knowledge. If you didn’t obtain legal help last year, many of your questions may have gone unanswered — questions just like the one we pose in this week’s blog post title:

Does child custody affect a divorced parent’s taxes?

To answer this question, let’s look at what the Internal Revenue Service has to say about this topic of interest.

When parents decide to separate or divorce, they should have the conversation about who will claim their child as a dependent on their taxes. That’s because there are some advantages to claiming a child as a dependent on your taxes, such as:

• The ability to file as head of household,
• Claim your child as an exemption on your tax form,
• Receive the child tax credit,
• Claim child care expenses in order to receive more on your refund,
• And the ability to receive the earned income credit

It’s important to point out that if you and your ex are filing separately, the IRS only lets one of you claim the child as a dependent. Also, in order to claim your child as a dependent, the child must have lived with you for at least half the year and you would have had to have provided at least 50 percent of financial support over the year. Generally speaking, the custodial parent is allowed to claim the child as a dependent though in some cases, noncustodial parents may be allowed to claim them under certain circumstances.

So, to answer the question above for our New Jersey readers, the answer is yes, child custody can affect your taxes.

Source: The Internal Revenue Service, “Publication 504 – Main Content,” Accessed Jan. 28, 2015