When going through the divorce process, taxes likely are not top of mind. Despite this, there are many common questions divorcing spouses have regarding how their children factor into the tax equation post-divorce.
Can both parents claim dependents on taxes?
After a separation or divorce, only the custodial parent can claim their children as dependents when filing taxes. The parent the children lived with the greater number of nights during the tax year is considered the custodial parent. If the children lived with both parents an equal number of nights, the parent with the higher adjusted gross income is considered the custodial parent. For more information, review this publication.
In some cases, the custodial parent may wish to release their claim to the children as dependents on their taxes. This would allow the noncustodial parent to claim their children as dependents instead.
One additional consideration is the Earned Income Tax Credit (EITC). Only the custodial parent is eligible to claim the EITC, and only if they meet the requirements. There are other tax credits the custodial parent may be eligible to claim, such as the Child Tax Credit, Child Care Credit, and Education Credits, to name a few.
Is child support taxable income?
Child support payments are not considered taxable income, which means when the recipient of child support files taxes, they would not include child support payments as a part of their adjusted gross income. Additionally, child support is not tax deductible for the paying parent.
Alimony payments are treated differently for taxes than child support. If a couple is divorced on or before December 31, 2018, alimony payments are considered taxable income for the recipient and are deductible by the payer. If the divorce occurred after that date, the recipient would not need to include alimony payments in their adjusted gross income, and the payer would not be able to deduct the payments from their taxable income.
Divorce can be challenging, and tax season can add an extra layer of unanticipated complication. Working with a Certified Divorce Financial Analyst® can help you be sure tax strategies are being considered during your divorce. Call us at 877-471-4654 to learn more.