Deciding who your child will live with may have been a difficult decision to make. Now, you have more to think about. What about your taxes? You know that having a child does result in certain tax benefits.
Your main question may be who should get those tax breaks and credits. Should it be the primary custodian who always uses the credits and tax breaks? Should the parent paying child custody use them? Here are a few things to think about.
1. Think about what a dependent child does for your taxes first
When you have a dependent child, there are a number of tax benefits. These include receiving credits for child and dependent care expenses, the earned income credit and the child tax credit, which is an exemption for your child and head-of-household status. In a relationship with two parents who are married, it's simple to claim the tax breaks on a single tax form. For divorced or separated parents, it's not as easy. You cannot split the benefits.
2. Claiming a dependent child
The dependency exemption isn't something you can split come tax time. Instead, you'll need to decide among yourselves who should receive the benefits. Typically, the custodial parent has the right to claim these benefits as the person who provides more than 50 percent of the child's support. If both parents qualify, then you may want to decide if you alternate taking the benefits each year or come up with a different plan for the benefits. Sometimes, it's more beneficial for a higher-earning parent to take the exemptions to save on his or her taxes, for example.
These are a few things to consider. Your attorney can talk to you more about these tax exemptions and what you should expect after divorce.
Source: FindLaw, "Child Custody and Taxes," accessed June 01, 2017