Claiming Children on Taxes After Divorce

Learn more about how parents decide who can claim a child on a tax return.

Divorce is always difficult, but with children, the level of complexity increases, especially around tax time. It's common for parents to wonder who can claim a child on their taxes after a divorce. In many cases, your divorce judgment will provide guidance, but you'll also need to follow the Internal Revenue Service's (IRS) rules to reduce the risk of an audit.

What are the Benefits of Claiming a Child on Your Taxes?

Parents overwhelmingly agree that raising children is expensive, regardless of where you live. To help offset the costs, the tax code offers parents a variety of tax credits that could reduce a parent's taxable income and result in a sizable refund at the end of the tax year.

Beginning with the 2018 tax year, the Tax Cuts and Jobs Act (TCJA) implemented significant changes to the tax code, including eliminating the personal exemption. To replace the loss of the personal exemption, the tax code nearly doubled the standard deduction. So, claiming a child in 2020 doesn't have the same impact it would have had in 2012.

Parents may qualify for the child tax credit, additional child tax credit, earned income credit, dependent care expenses, or a head of household filing status.

The Child Tax Credit

The new tax code doubled the Child Tax Credit amount from $1000 to $2000 per child. The tax credit is non-refundable, meaning that it only impacts your overall taxable income. Unlike other deductions, the child tax credit will only reduce your tax liability to $0 and will not, on its own, result in a refund. Some parents will use the entire $2000 benefit by not paying much or anything back to the IRS.

Additional Child Tax Credit

Parents with lower income may only need a portion of the child tax credit to benefit from the tax break. In that case, the parents can also apply for the Additional Child Tax Credit (ACTC). The ACTC is misleading because many parents believe you have to have more than one child to utilize the credit.

Instead, the ACTC is available to parents who claim the child tax credit but don't use the entire $2000 benefit. If qualified, the parents can receive up to $1400 per child as a refund after the initial child tax credit is applied. The credit is only available to parents if the refund equals at least 15% of the parent's taxable earned income.

Earned Income Credit

The Earned Income Credit (EIC) is available to parents (and non-parents) who work and have earned income under $55,952. The tax credit typically leads to more money in your pocket at the end of the tax year and may also reduce the amount of taxes you owe the IRS. To claim the EIC, you must meet specific income and other requirements. For more information on the EIC, and to determine whether you qualify, visit the IRS website.

Child and Dependent Care Expenses

In some cases, parents may qualify to claim a child's daycare or other work-related expenses throughout the tax year. Typically, only custodial parents qualify for care expenses credits and must demonstrate that the child lived with the parent for at least six months of the year.

Head of Household

Parents may also qualify to change their filing status to "Head of Household" instead of Single. When you file as Head of Household, your tax rate is usually lower than that of someone filing as Single or Married Filing Separately. You will also receive a higher standard deduction than if you file using another status.

What's Required to Claim a Child on Your Taxes?

First, your child must qualify as a "dependent" under the IRS rules. You can read more about the qualifications of a dependent in IRS Publication 501. For a more in-depth look into the rules of claiming a child, review IRS Publication 929, Tax Rules for Children and Dependents.

The Child Tax Credit

In addition to being a qualified dependent, the child must meet the following requirements to qualify for the full $2,000 Child Tax Credit:

  • the child has to be under age 17 at the end of the year
  • you must claim the child as a dependent on your return
  • the child can't have provided over half of their own support for the year, and
  • the child must have a Social Security Number.

If the child turns 17 on the last day of the year, that child is ineligible for the full $2,000 Child Tax Credit but would qualify for the new $500 Credit for Other Dependents.

For more information on the rules and qualifications for this credit, review IRS Publication 972, Child Tax Credit.

Child and Dependent Care

To qualify for a tax credit towards your child's care expenses, you must demonstrate the following:

  • the child is a qualified person (dependent)
  • you meet the IRS's earned income threshold for the credit
  • you incurred the care expenses while you worked or looked for work
  • you made care payments to someone who is not your dependent (you can't pay another child for daycare and request the care credit)
  • you must file as single, head of household, qualifying widow, or married filing jointly, and
  • you must identify the care provider's tax identification number on your return.

Read more about this credit in IRS Publication 503, Child and Dependent Care Expenses.

Head of Household

To file as a Head of Household, the IRS requires you to meet all of the following requirements:

  • you are unmarried on the last day of the year (December 31)
  • you paid more than half of the expenses to keep up your home during the year, and
  • a qualifying person (dependent) lived with you for more than half the year.

For the IRS to consider you "unmarried," you must meet the requirements above and:

What Happens in Cases Where Parents Share Joint Custody?

Usually, the custodial parent gets the benefit of the most tax breaks involving the child. If the parents share custody, it's common for the custody or divorce order to specify which parent can claim the child.

If the noncustodial parent claims the Child Tax Credit, the custodial parent must complete the IRS form, releasing rights to the credit. Without IRS form 8332, the IRS may reject your request to use the tax benefit. If that happens, and the custodial parent claims the child instead, you may need to go back to court to force the filing parent to give your money back. The IRS doesn't involve itself in domestic fights over child credits, so it will not help you fight for repayment.

In joint custody situations, parents often alternate the tax credits. For example, a custodial parent will claim the child in even tax years, and the noncustodial parent will claim the child in odd tax years. In families with multiple children, parents can also opt to split the tax benefits for the children. For example, if you have two children, each parent can claim one.

If you're going through a divorce, it's important to address these tax issues before the judge finalizes your order. You will still need to provide the IRS with the required forms if you're claiming a child and are not the custodial parent.

Because the child will presumably live with the custodial parent for more than 6 months of the year, the other parent will not qualify for childcare coverage credits or Head of Household filing status. Additionally, the noncustodial parent will not qualify for the Earned Income Credit unless the parent meets the credit's other IRS requirements.

If you have questions about claiming a child on your taxes, speak with an experienced tax or divorce attorney in your area.

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