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Family Law

: California Divorce and Family Law

Noncustodial parents can get some tax breaks

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Q: My divorce decree says that my wife gets custody of the kids and that I get to claim them as dependents on my taxes. If my ex-wife signs the form each year that lets me claim the kids as dependents, can I also file as head of household? Are there any other tax benefits I can get by claiming the kids as dependents?

A: As a noncustodial parent, you can't file as head of household, even if you can claim your kids as dependents. You can't get the earned income tax credit, either. But if your ex-spouse lets you claim the kids as dependents, you can claim the child tax credit, which could reduce your taxes by up to $1,000 per child.

The custodial parent is ordinarily entitled to claim the kids they care for as dependents for tax purposes. Each dependent is an exemption that reduces the tax filer's income by $3,300. That income reduction translates into a tax reduction of $330 to $1,155 per dependent.

The custodial parent can waive the right to claim the kids as dependents and let the noncustodial parent claim them. The best way to do that is with an IRS Form 8332. It has a line where the custodial parent can sign and date the statement, "I agree not to claim an exemption for _____ for the tax year 2005."

The custodial parent can waive the dependent exemption each year, or for a number of years. The noncustodial parent files the 8332 Form with his or her taxes, and is thereby entitled to claim the children as dependents. That does not, however, entitle the noncustodial parent to file his or her taxes as a head of household.

The requirement that heads of households care for their kids at least six months out of the year cannot be waived. Because only heads of households can get the earned income tax credit, and noncustodial parents can't be heads of households, noncustodial parents can't get the earned income tax credit.

While being able to claim kids as dependents doesn't entitle a noncustodial parent to file as head of household, it does entitle him or her to claim the child tax credit. That credit runs with the dependent child, so whoever claims the kid as a dependent gets it.

Thanks to the St. Louis Post-Dispatch.

Full post as published by California Divorce and Family Law on April 12, 2006 (boomark / email).

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