Dependent Exemptions

Before tax year 2018, married parents could claim dependent exemptions for their children on their joint tax returns. After divorce, only one parent could claim a child as a dependent. Dependent exemptions have been replaced beginning in tax year 2018, but having a dependent (“qualifying”) child can still significantly affect your financial situation.

What is a qualifying child under IRS rules?

When parents are divorced, only one of them can claim a child as a dependent for any given tax year. To be considered a qualifying child for federal tax purposes, a child must:

  • Be related to you
  • Be under the age of 19, a full-time student under age 24, or permanently and totally disabled
  • Live with you for more than half the year (with certain exceptions)
  • Be supported at least 50% by you
  • Not be claimed by anyone else on their taxes

How can claiming a child as a dependent benefit a parent financially?

Claiming a child as a dependent for income tax purposes can save a parent thousands of dollars. It can make the difference between owing money for taxes and getting a refund. Beginning with tax year 2018, personal exemptions were replaced by:

  • Increased standard deduction
  • Child Tax Credit worth $2,000 per qualifying child in 2020 – increasing to $3,000 in 2021, with an additional $600 for children under the age of six
  • Additional Child Tax Credit worth up to $1,400 per qualifying child in 2020

IRS dependent rules also apply to the Earned Income Tax Credit, the Child and Dependent Care Credit (for childcare expenses), medical expenses, and other itemized deductions and credits. Having a qualifying child can also make you eligible to file as head of household. This entitles you to a larger standard deduction than you would receive if your filing status was single. For tax year 2021, the standard deduction for head of household goes up to $18,800, as compared to $12,550 for a single filer. You must have at least one dependent and be considered unmarried to claim head of household filing status.

Who can claim a child as a dependent after a divorce?

Under IRS rules, the custodial parent is allowed to claim a child as a dependent on tax returns, as a default, unless another arrangement is specified. The IRS considers the parent who spends the most time with the child to be the custodial parent. However, parents can arrange to share eligibility to claim a child between them in their chosen manner. For example:

  • Parents with more than one child together can each claim one or more of their children as dependents.
  • Parents can agree to alternate years for claiming a child or children as dependents.

The issue of claiming children as dependents should be addressed during divorce negotiations, along with other financial matters such as spousal maintenance, child support, and asset division. It should be stated in your divorce decree which parent is allowed to claim each child and when.

What happens if both parents claim a child as a dependent?

If both parents claim the same child on their annual tax returns, it could trigger an IRS audit and delay the processing of the returns. If a parent claims a child knowing they are not qualified to do so, that parent could be charged with tax fraud and face serious felony penalties. If the divorce decree contains a provision stating which parent is entitled to claim a child as a dependent, a parent who claims a child in violation of that court order could be held in contempt of court.

Who is allowed to claim a child under federal rules?

Under federal law, custodial parents are entitled to claim their children as dependents unless they sign a written waiver releasing that claim. If the divorce decree does not specify who can claim a child as a dependent, unless there is a signed waiver, the custodial parent is automatically entitled to that claim. However, an Illinois family court can order a custodial parent to sign a waiver, effectively assigning the right to claim the child as a dependent to the non-custodial parent.

What does the IRS require for a non-custodial parent to claim a child?

Generally, the IRS considers the parent who lived with the child for a greater number of nights to be the custodial parent. A custodial parent who wants to release the right to claim a child as a dependent to the non-custodial parent must fill out IRS Form 8332, “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.” The non-custodial parent must still be eligible under IRS rules to claim the child.

Our legal team at Beermann LLP in Chicago and Bannockburn can assist you with every aspect of divorce. Our attorneys are at the top of their field and known for achieving exceptional results. Established more than 60 years ago, we are the family law firm that cares.