Navigating divorce can be complicated enough before tax season comes around. Claiming children on taxes after divorce or separation is a common issue that parents have, and mistakes can be costly. Incorrect filing, like misunderstanding who has the right to claim a child, can lead to delayed refunds or disputes between former spouses.
For divorced or separated parents in Texas, it is important to understand tax credits and what the IRS requires.
Even if a divorce order addresses tax issues, the IRS follows federal law to determine who can claim a child as a dependent. The Carlson Law Firm has skilled family law attorneys to help you through many aspects of divorce, especially if children are involved.
The Complications of Claiming Children on Taxes After Divorce
The final divorce decree is not the end of the process, because tax rules can add complications, adding another emotional battle. Many parents assume that a divorce decree alone decides who gets to claim a child after divorce, but that is wrong.
IRS rules extend across the nation, regardless of what a custody order states. According to IRS rules, the right to claim a child as a dependent generally depends on:
- If both parents meet eligibility requirements for tax credits
- Which parent the child lived with for most of the year
- Whether there is a valid release of the dependency claim
Divorce Decree Assumptions
A frequent error that parents make is assuming the divorce decree determines who gets to claim a child on taxes. Some divorce orders do have language regarding tax exemptions or credits, but the IRS does not have to follow a state court order.
The IRS usually requires Form 8332 for divorce decrees that allow a noncustodial parent to claim the child, and it needs to be signed by the custodial parent. Without this form, or its equivalent, the IRS may deny the claim even if the decree says otherwise.
Not following the rules of IRS documentation can lead to denied child tax credits or more scrutiny on your tax return.
Misunderstanding Custodial vs. Noncustodial Parent Rules
Federal taxes consider the custodial parent to be the parent with whom the child lived for more than half the year. The definition of a custodial parent for federal tax purposes does not always match legal custody arrangements or parenting plans. In most cases:
- The custodial parent may qualify for the child tax credit and Head of Household
- The custodial parent has the right to claim the child as a dependent
- The noncustodial parent usually cannot claim the child unless the custodial parent signs Form 8332
Both Parents Claiming the Same Child
Many parents misunderstand the federal tax definitions of custodial and noncustodial parents, which can lead to both parents attempting to claim the same child. The IRS will flag the issue automatically, typically resulting in:
- Possible audits
- Delayed refunds
- Denial of child tax credits to one or both parents
- Requests for additional support documentation
Child Tax Credit After Divorce
Only one parent can claim the child tax credit after divorce in a given tax year. Understanding the child credit is another common area for tax mistakes after divorce. Eligibility to claim the child tax credit depends on several factors, with key points being:
- Income thresholds must be met
- The child must meet age and dependency requirements
- The parent claiming the credit needs to be eligible under IRS rules
A noncustodial parent might be allowed to claim the child as a dependent through Form 8332, but that does not automatically give access to all tax-related benefits. Head of household filing status or some care-related credits may still not be granted.
Coordinating Alternating-Year Agreements
There are divorce agreements that allow parents to alternate years claiming a child. However, that arrangement still needs to comply with IRS rules. Problems can occur when:
- Form 8332 is not attached or updated
- Tax software is not used correctly
- Parents forget whose year it is
Improper documentation for alternating year agreements can lead to rejected returns or losing tax benefits. For help with your divorce agreement, schedule a consultation with our experienced family law team.
Earned Income Tax Credit Divorce Custody Rules
The Earned Income Tax Credit (EITC) has its own set of requirements and cannot be transferred between parents using Form 8332. Parents who are eligible for the EITC still need their qualifying child to meet three requirements:
- The child must have a specific relationship to the taxpayer.
- The child must be under the age of 19 (or 24, if they are a full-time student) or be completely and permanently disabled.
- The child has to share a U.S. residence with the taxpayer for over half the year.
In most situations, only the custodial parent can claim the EITC. Many parents assume that dependency releases apply to all credits, but this mistake can result in denied claims or repayment.
Updating Filing Status After Divorce or Separation
Divorce and separation usually mean changes to filing status, withholding and exemptions. If you continue to file incorrectly, it can cause issues with your tax return. An example of a common mistake is using married filing jointly when you are separated. Before filing, parents should review:
- Withholding adjustments
- Filing status eligibility
- Dependency claims each year
Remember that tax obligations can change as child custody schedules do, or if there is a shift in financial circumstances.
How IRS Tie-Breaker Rules Apply When Parents Disagree
In the instance that parents cannot agree who gets to claim a child after divorce, the IRS applies tie-breaker rules. These rules take multiple factors into consideration, including:
- Length of residency
- Custodial parent status
- Adjusted gross income
Once applied, these IRS rules can override informal agreements between parents. Understanding these standards and rules could help parents prevent disputes or arguments.
FAQ: Claiming Children in Texas After Divorce
Can both parents claim a child as a dependent after divorce?
No. Only one parent may claim a child as a dependent in a given tax year.
Who gets to claim a child after divorce?
In most cases, the custodial parent has the right to claim the child unless a valid release is provided to the noncustodial parent.
What happens if both parents claim the child?
The IRS will apply tie-breaker rules and may delay refunds or deny credits.
Does a divorce decree decide who claims the child?
Not by itself. The IRS requires compliance with federal rules, including Form 8332 when applicable.
Can parents alternate years claiming a child?
Yes, but proper IRS documentation is required each year.
When Legal Guidance Can Help
Many tax disputes involving children can intersect with family law issues, including enforcement or modification of divorce orders. People needing help with filing and compliance should seek tax professionals, but family law attorneys understand divorce.
Our team at The Carlson Law Firm can clarify how divorce agreements coincide relate to federal tax rules, and what steps may be available when conflicts happen.
Avoid Tax Mistakes After Divorce
Figuring out who gets to claim a child after divorce can be confusing, especially when IRS rules do not align with custody arrangements or divorce orders. Understanding common mistakes when claiming children on taxes after divorce can help to avoid them.
It can also reduce stress and prevent costly tax issues, so professional help can be useful. Tax laws and family situations can change, so it is important for divorced parents to prepare a tax strategy each year. If there are questions about your divorce agreement, our family law attorneys can help. Contact The Carlson Law Firm and schedule a consultation.
