Split Exemption: Claiming One Child on Two Tax Returns — The Legal Way

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Sometimes when I’m working with a divorced couple, it seems that the most beneficial way to prepare the tax return is to split the exemption for their child. When I say that, they always tell me, “But I heard that was against the law!” No—that’s not exactly true. But let me tell you, there is a right way and a wrong way to do it. If you follow the rules and do it correctly, it’s not only legal, it’s the right thing to do. Warning: if you don’t follow the rules, you could be breaking the law. I give a lot of advice to do-it-yourselfers, but if you’re planning to split an exemption, I recommend you go to a professional for it. (And if she tells you it can’t be done—hire somebody who knows what she’s talking about.)

With most divorced couples (I’m including here couples who were never married but have split apart and have lived apart for at least 6 months of the past tax year), one parent (usually the mother) has custody and the other parent (usually the father) has visitation rights. A lot of couples say that they have “joint” custody – for example, the kids stay with the dad every Wednesday night and every other weekend and with the mom the rest of the time. If you count the days, under IRS rules, the mother wins on the custody status. According to the IRS, wherever the child spends the most nights is where the child lives—if you’ve got one of those every other weekend and every Wednesday night agreements, the IRS doesn’t count that as being equal.

In my example, I’m saying the child lives with the mother. In IRS lingo, the mother in this example is the “custodial” parent and the father is the “non-custodial” parent.

In this case, the mom has all the power—she’s the custodial parent. The mom can claim all the benefits of having a child on the tax return. Those benefits include:

  • Head of Household filing status-a lower tax rate
  • Childcare tax credit-credit for money you spend on daycare
  • Childcare exclusion-so you don’t get taxed if your company pays for daycare
  • Earned Income Credit-this can be worth up to $3,094 for one child
  • Exemption for the child-a deduction of $3,600 off your income
  • Child Tax Credit-worth up to $1,000

When tax professionals tell you that you can’t split exemptions, what they’re reading is the section of Pub. 17 (that’s like our Bible for tax stuff) that says these things always go to the same person. What they’re not reading is page 31—the part that tells you about the special rules for divorced or separated parents. Under the special rules section, it says that the mom (our custodial parent) can release the exemption for the child to the father (the non-custodial parent). This lets him claim the exemption and the child tax credit on his return, while the mom keeps the head of household status, the dependent care credit, and the EIC on her return.

Why would anyone want to do this? Lots of reasons! Number one, of course, is to maximize the amount of money you get back from the government. A lot of times, after a divorce, the mom doesn’t have a very high taxable income. Remember, child support isn’t taxable. The dad has lost a lot of his deductions so his tax bill could be pretty high. He’d probably never qualify for an earned income credit anyway, but the $1000 child tax credit would really help him out. If the mom’s taxable income is really low, she wouldn’t even qualify for the $1000 child tax credit. In some cases she could give it away without it hurting her at all. Or maybe the father is behind on child support, she could negotiate: if he catches up on the child support by December 31st, she’ll sign the form to allow the father to claim the child’s exemption. Remember, when claiming the exemption for a child, the custodial parent has all the power. If the dad claims the child without permission, the mom can just file her own return fully claiming the child and sending the dad’s return to the IRS audit division. You don’t want that to happen.

Splitting an exemption isn’t the best choice for everybody. You have to look at both returns and see if it’s going to work. It also helps to be on good terms with the ex—this certainly doesn’t work well with people who are fighting.

There are a lot of other rules that I haven’t even touched. (That Pub. 17 book is 295 pages long!) But if you are divorced or separated, you need to know that splitting an exemption might be an option for you to use on your income tax return.


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EIC questions of any kind:  http://www.irs.gov/Individuals/Earned-Income-Tax-Credit-(EITC)-%E2%80%93–Use-the-EITC-Assistant-to-Find-Out-if-You-Should-Claim-it.

How to find free tax preparers:  http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers

How to find your local IRS office:  http://www.irs.gov/uac/Contact-Your-Local-IRS-Office-1

If you want to hire us, please call (314) 275-9160 or email us.  We do prepare returns for people all over the country (and a few foreign countries as well.)  We are sorry but we cannot prepare an EIC return for someone outside of the St. Louis area because of the due diligence requirements.

307 thoughts on “Split Exemption: Claiming One Child on Two Tax Returns — The Legal Way

  1. Hi Phillip,
    Ummm–it sounds to me like maybe you should pay half of the daycare or all of the insurance.
    I’m not trying to be a jerk here. But I’m afraid that is must sound that way.

    The bottom line is you and she have some sort of agreement. The person who has custody is the one who pays for the daycare–at least that’s pretty normal. So, if you really have custody of the kids, why is she paying for the daycare? She shouldn’t need daycare if your son is with you, right?

    The bottom line is that the IRS is going to look at where the children sleep at night. How do you prove that? The daycare provider is going to have her address as the primary home. So is the insurance. What have you got? I’m thinking paying for the day care is the way to go. But you won’t be able to claim him this year as you haven’t paid the daycare all year. You’d need to start doing it now to claim him next year. Sorry, I don’t think that’s what you wanted to hear.

  2. Hi Alex,
    Since you are filing a paternity suit does that mean there is a question as to whether or not you are the father? Because if you aren’t the real father, then you have no claim on the child’s exemption at all.
    But, I think you mean you are filing suit to keep him–different story.

    Now, a couple of problems. First, since your ex is getting assistance for his healthcare, etc. She needs to claim him as living with her–otherwise she loses those benefits.

    What you could do is split the exemption and you claim the exemption, while she claims head of household and EIC. That would help both of you.

    If you go to battle and try to claim everything, you need to figure out how you’re going to pay for his health insurance, etc. What you gain in tax credit is nothing compared to what you could lose in health insurance benefits. So think carefully–what is best for your son?

  3. Hi Otis,
    Excellent question. You can claim your child as an exemption, but your ex claims for head of household. You can honestly state that your child has health insurance. You’re good there. Your ex can still file for the health insurance by having the child for head of household purposes. You’re both good.

  4. Hi Jan,

    This website has been extremely helpful, thank you for that!

    I do have a few questions regarding my situation.

    My son’s father and I were never married and we separated 10 months ago. We have joint custody of my son with his primary residence being with me. He spends most of the week with me, so I am the custodial parent (according to the IRS).

    But in our agreement filed within the court, we are required to alternate years claiming our son as a dependent. This first year being separated is his year (my sons father) to claim him.

    I am confused about the possibility of claiming my son on both of our taxes. So he can claim him as a dependent, but I can still claim head of household and the EIC? How would I be able to claim those without listing my son as a dependent?

    I am perfectly fine with him claiming my son because it is within our agreement, but if it is possible for me to still receive some credits I would like to. It doesn’t seem fair to file as a single person when money I receive for childcare expenses (a grant from my school because I am a full-time student) is factored into my income resulting in a lower refund.

    Maybe this would be a better question for my attorney, I am just starting to figure this out. Any information would be helpful!

    Thank you!

  5. Hello, I live in MO. I am a full time nursing student graduating May 2015. My daughter is a 2nd year pre-nursing major. My divorce decree says I can claim her in the odd years. I have always honored this.

    Here is my the situation / question.

    I claimed her last year and college tuition that I paid out of pocket. THIS year, her father will claim her. His 1/2 of her tuition is paid from HER Missouri MOST account provided by her grandparents.

    Since he is claiming her as dependent – I can not deduct the tuition, books, and expenses. Is this correct????? If he is claiming her, is he getting MY deduction for CASH out of MY pocket?

    I am almost done with nursing school, and with accelerated program (8 week sessions) I was unable to work this past year and was hoping to get more back on my taxes to help catch up.

    Any ideas??

    Your help is SO appreciated!

  6. Hi Tara,
    On the 1040 when you claim head of household (box 4) there is a line where you write in the name of your child that you are using for your head of household status. Ideally you are doing this in computer software, but that’s what the return looks like–your child’s name should show up on that line. Also, he’ll show up on the EIC page.
    Have someone prepare your taxes professionally to make sure they’re done correctly. Head of household filing status should also help with your student grant as well.

  7. Hi Kathy,
    Ahem. The parent claiming the exemption is the one who gets the American Opportunity Tax Credit. Yep that hurts.

    Of course, he may not know about it. You may be able to negotiate it. But yes, that seems to be the most unfair rule of all. And I’m sorry, I don’t have a work around for you.

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