One of the most trying things for newly divorced parents to deal with is filing their tax returns. For many, this will be the first time they deal with their own returns in quite some time, and they may not be familiar with all the benefits and deductions they can take advantage of. One of the most contentious issues they must deal with is how the Child Tax Credit is allocated (i.e. who gets to claim the credit on their tax returns.)
Generally speaking, the custodial parent may claim the credit, but the situation may become complicated when parents are awarded joint physical custody and equal parenting time. In essence, when parents have equal parenting time, who is classified as the “custodial” parent?
Also, what happens in situations where one parent is awarded primary custody, but the child ends up living with the other parent and the decree does reflect this change? The likely answer is that the problem becomes exacerbated because parents will spar over who is actually entitled to claim the credit.
In these situations, it is helpful to consult an experienced family law attorney who has some experience dealing with tax issues (either in structuring a settlement or dealing with post-decree enforcement actions. A good lawyer could suggest cost-effective solutions, such as alternating the use of the credit each year. For families with more than one child, each parent may be able to claim a child as their dependent, which would ostensibly enable both parents to use the credit.
Source: FoxBusiness.com, “ 7 tax mistakes you don’t know you’re making, “ January 17, 2014; IRS.gov – Ten Facts about the Child Tax Credit, February 10, 2011