When a child custody order identifies a custodial and noncustodial parent, the custodial parent claims the child on their tax return. However, one of the more complicated aspects of an equal custody arrangement is determining which parent will claim the child as their dependent and be eligible for child-related tax credits.
In many cases, the best outcome of a couple’s divorce is an evenly shared or “50/50” shared custody of their child(ren). But, the IRS allows only one person to claim tax benefits for a qualifying child.
Who claims your child on taxes when you have a 50/50 custody agreement is one of many issues an experienced divorce attorney should help you settle as part of your separation agreement. At Leigh Daniel Family Law, we recognize that financial planning during your divorce is crucial. We also assist with child custody orders in cases involving unmarried parents.
Below, we review the basics of the Child Tax Credit and how divorced parents can and cannot use this deduction. If you are headed for divorce, we can help you approach it strategically so that you start your new life in the best financial position possible. You should also follow up with a qualified financial advisor or tax accountant before making any lasting financial decisions. To get started, contact our Huntsville, Alabama office for a confidential consultation about efficiently and effectively dissolving your marriage.
Joint Custody Arrangements and Tax Implications
When both parents share equal physical custody of their child, this joint custody arrangement is sometimes known as “50/50 child custody.” It is an agreement and/or court order that the child will spend roughly half (50%) of their time living with each parent. But who is the custodial parent in 50/50 custody, and how many overnights is 50/50 custody? The answers to these questions can have significant tax consequences.
“Physical custody” refers to the parent with whom the child primarily lives. A divorce decree will state who has physical custody of the parties’ underage children (the “custodial parent”) and who has “legal custody,” or the right to make major decisions about the child’s life. Alabama courts consider 50/50 joint physical custody to be in the best interests of a child unless the court is presented evidence otherwise.
The Child Tax Credit (CTC) is a federal income tax deduction for families with qualifying dependent children. For the 2024 tax year, it provides up to $2,000 for each qualifying child up to age 17 if the taxpayer meets all eligibility factors and their annual income is not more than $200,000 ($400,000 if filing a joint return), according to the Internal Revenue Service. Other dependents — including children ages 17-18 and full-time college students ages 19-24 — can receive a nonrefundable credit of up to $500 each.
But, despite a court-ordered 50/50 custody split, the IRS says that an individual may be a dependent of only one taxpayer in a single tax year. Generally, for CTC purposes, a child is the qualifying child of the custodial parent. Custodial parents generally have the right to claim the dependent child on their tax return unless the custodial parent signs a written agreement allowing the other parent to claim the child. Per IRS rules, the custodial parent is the parent with whom the child lived for the longer period of time during the year. In a 365-day year, that’s 183 overnights or more.
While the Child Tax Credit is important, there are other tax benefits related to claiming a child as a dependent that ca. The parent who claims a child as a dependent may receive other valuable tax benefits, such as the earned income credit, dependent care credit, or other tax credits or deductions that can make a significant difference when filing taxes. Notably, a noncustodial parent does not receive a deduction for child support they paid. Likewise, this is not considered income for the custodial parent for tax purposes.
IRS Guidelines for Claiming Dependents in Shared Custody
If you are wondering who claims a child on taxes, you are not alone. To claim a child related to you as a dependent, the child:
- Must be:
- under age 19 at the end of the year and younger than you
- under age 24 at the end of the year, a student, and younger than you
- or any age if permanently and totally disabled
- Must not have provided more than half of their own financial support for the year
- Must not be filing a joint return for the year
- Must have lived with you for more than half of the year
If the child’s parents are separated or divorced, only the custodial parent can claim the child as a dependent. The custodial parent is the parent with whom the child lived for the greater number of nights during the year.
If the child’s parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater number of nights during the rest of the year.
According to IRS tiebreaker rules, a child is treated as living with a parent for a night if the child sleeps:
- At that parent’s home, regardless of whether that parent is present; or
- In the company of that parent when the child doesn’t sleep at a parent’s home (for example, the parent and child are on vacation together).
If a child wasn’t with either parent on a particular night (was staying at a friend’s house, for example), the child is treated as having lived with the parent with whom the child normally would have lived for that night. If that can’t be determined, the child is treated as not living with either parent that night.
If a child lives for more days but not nights with a parent who is required to work at night, that parent is treated as the custodial parent.
On school days, the child is treated as living at the primary residence registered with the school.
If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income, the IRS says.
Waiving the Right to Claim a Dependent
Parents who have agreed on a 50/50 custody arrangement may be amenable to sharing the tax benefits of raising a child as part of their separation agreement. For example, a common arrangement among parents with shared custody is to alternate years taking the Child Tax Credit. Or, if the parents have multiple children together, they may split the credits between children.
When the eligible parent chooses to allow the other parent to claim their child as a dependent, they can do so by completing Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. The parent claiming the CTC would attach this form to their tax return.
A divorcing couple with two children (or a higher even number) might decide that one parent will claim the same child(ren) every year, and the other parent will claim the other(s). Parents with three children (or an odd number) may agree to an arrangement like allocating one child to one parent, a second child to the other parent, and then alternating years for the third child.
Parents of an older child not planning to go to college who have agreed to 50/50 custody might agree that the custodial parent will take the tax deduction but pay the other half of the tax deduction available for one, two, or three more years. Or in lieu of cash, there may be a piece of personal property or some other marital asset that may be traded for rights to the CTC for an agreed-to number of years.
It is important that any arrangement that requires the custodial parent to give up their rights is clearly stated in the couple’s separation agreement or divorce decree. It should also state that each party agrees to revisit the agreement in good faith as either party’s circumstances change and updates become necessary.
Benefits of Hiring Our Family Law Lawyers
You can count on an Alabama child custody attorney from Leigh Daniel Family Law to:
- Clearly explain Alabama’s complex divorce and child custody rules
- Protect your rights, particularly regarding access to your children
- Confer with your tax or financial advisor, as necessary, to ensure custody plans protect your financial well-being
- Work to resolve thorny issues with patience, insight, and special attention to detail
- Stand with you during this difficult time to negotiate an acceptable child custody agreement informally or through mediation
- Pursue equitable modifications to a child custody agreement when your circumstances change
Leigh Daniel is a seasoned Huntsville, AL divorce attorney who brings more than two decades of experience in family law to your case. She focuses on helping individuals through divorces with complex needs and considerations. Our legal team can work to develop a tailor-made plan for child custody arrangements that meet the best interests of your child and your needs, as well.
Contact a Child Custody Attorney in Huntsville You Can Count On
Determining which parent claims a child on taxes is only one potential obstacle you can encounter when considering joint custody. If you are facing the complications of making a 50/50 child custody agreement work for you and your ex-spouse — and your child(ren) — our dedicated Huntsville child custody lawyers are ready to propose and push forward with innovative strategies to make it happen for you. We are a full-service family law firm that takes pride in having the skills and experience to handle even the most complicated divorces and extenuating circumstances. No matter how you feel when you first come to our office, we want you to walk out feeling hopeful and empowered about the life ahead of you.
Contact us today to find out how our skilled and compassionate team will help you develop smart and livable arrangements that meet the needs and protect the rights of you and your children. Reach out online or by phone at (256) 692-1353.
