Maybe. But first an explanation.
A divorce or separation can have a major impact on the taxes of the taxpayers involved. And no issue can be harder for a tax pro to deal with than which parent can claim the dependent exemption. While the rules can be a little convoluted, the big problem is the emotion of the issue and the fact that too many attorneys writing the divorce decrees have not keep up with tax law changes and documentation requirements.
The basic rules to claim your child as a dependent (all subject to qualifications and exceptions):
- You can’t be claimed as a dependent on someone else’s return. Not that you are being claimed but that you can’t be claimed. There is a difference.
- A dependent can’t file a Married Filing Joint return with their spouse (of course there is an exception.)
- The dependent must be a US citizen or US national or a resident of the US, Canada or Mexico.
- The dependent must be the taxpayer’s son, daughter, stepchild, fosterchild, brother, sister (steps count too) or a descendent of one of these individuals. (There is a 2nd set of requirements if the child not one of these.)
- The dependent must live with the taxpayer over 6 months of the year.
- They have to be under age 19 or disabled or under 24 and meet student requirements.
- The dependent can’t have had enough income to provide over half of their support for the year.
For parents who are no longer together the big issue is number 5 since they generally both meet all of the others. Between the 2 parents, they must have had custody of the child for over half the year. But, only one parent can claim the dependent exemption for the child on the tax return. The IRS has decided (based on Congress's laws), and it has stuck in court, that the parent who actually (physically) had the child more nights during the year gets the exemption. If the court documents give both parents “joint custody” with the child’s physical residence switching every 2 weeks, then the parents will need to sit down with a calendar and count who had the child more nights during the year. That parent has the right to the claim the exemption for that child. If it gets to the point that the IRS is involved, they don’t care what the divorce decree or other court documents say. They want to know who had the child more during the year. And that parent will get the exemption for that child even if the difference is just one night. They become the tax custodial parent.
The custodial parent has the right to give the non-custodial parent the exemption for that child. They can only “release” the exemption the other parent (no friends, grandparents, brother…) and they are only giving the exemption, and if the child meets the requirements, the child tax credit. There is some documentation required. The custodial parent will need to sign a Form 8332-Release of Claim to Exemption. There are three parts on the form. The first section releases the exemption for that child just for one specific year. The second part allows the release for more than one year. The final section cancels a prior Form 8332 for multiple years. The Form 8332 will be sent to the IRS when the non-custodial parent claims the child on the return. A substitute to Form 8332 can be used but it must include all the same info as the actual form. If the return is paper filed, the Form 8332 goes in with the return. There are special rules to mailing if the return is e-filed. And this will have to be done each year the child is claimed even if the release is for multiple years.
Now for the big issue, a divorce decree or support document generally won’t work to claim an exemption for a child. For it to be acceptable to the IRS, the document must first have no conditions to the release of the exemption. Say Dad has custody but must release the child’s exemption to the Mom in even tax years. So far that will work. However if the exemption release is contingent on Mom being up-to-date on child support, Mom will need a Form 8332. If there is no contingency restricting the exemption, then the court document must be signed by the parents. By the parents, not signed by the attorneys for the parents. If both rules are met, the court document can be used like a Form 8332 as long as a copy is sent to the IRS. I’m sorry, but if the custodial parent won’t sign the Form 8332, it doesn’t matter what the divorce decree says. The only way to force it is to get the attorneys involved.
Dependency issues are confusing and this is just a quick overview of one issue. Please check with a tax pro about your specific situation. Oh, and make sure you keep a copy of the signed Form 8332 or court documents for your records.