The ability to claim a child or another dependent on a tax return can have a profound impact on the ability to claim deductions or credits. It can also impact a person’s chances of claiming Head of Household status. If there is no custody or similar agreement in place, the IRS will use a series of rules to determine which person gets to claim a person as a dependent.
First, if the dependent is a child, parents are generally given preference over those who aren’t the child’s parents. In the event that parents share custody equally, the parent who has the highest adjusted gross income generally gets the credit. This is because the person with the higher income is thought to have done more to support the child. The same rule comes into play if a parent doesn’t claim the deduction but someone else does.
Generally, the IRS will award the credit to the person who claims it first. Parents are free to come up with their own rules as to who claims the credit in the event that both qualify to do so. If a dispute occurs, a parent may need to submit a paper application as opposed to filing a return electronically. From there, the agency will look to see who should get the credit.
In a divorce settlement, it may be necessary to determine who gets to claim a child as a dependent for tax purposes. In some cases, a parent may trade the right to do so in exchange for other property or assets that the other parent may want or need. While spousal support may be addressed in a divorce agreement, child support and custody matters generally need to be determined by a judge in a separate hearing.