When it comes to divorce and taxes, the IRS cares about who the custodial parent is. Custodial = who has custody of the kids more nights out of the year.
Note: many people say “well we have joint custody.” Or “my divorce decree says blah blah blah.”
Unless you truly have custody an equal number of nights out of the year, one of you is the custodial parent and the other is the non-custodial parent. And the IRS doesn’t care about your divorce decree and most divorce decrees are total dumpster fires anyway when it comes to who claims the kids.
Contrary to what your divorce decree probably says, tax law says ONLY the custodial parent can claim the kid as a dependent. The custodial parent can waive the claim to the dependency exemption and child tax credit by providing the non-custodial parent with a Form 8332. This allows the non-custodial parent to claim the kid as a dependent, and claim the child tax credit. The custodial parent can still claim the other tax benefits such as head of household filing status, daycare expenses and the earned income credit.
So what do you do if your ex is not entitled to claim the kid, but they do anyway? Let’s look at it from both sides.
Non-Custodial Parent Claims the Kids
Sometimes the non-custodial parent claims the kid even though they’re not supposed to. If you are the custodial parent and have not released your claim to the kid via Form 8332, you are the only one who can claim the kid on a tax return. This is what tax law says; the divorce decree may say something else but again, the IRS doesn’t care about the divorce decree.
So what do you do in this situation? When you are the custodial parent and your ex wrongly claims the kids, you can’t e-file. You’ll need to put the kid on your return as a dependent, attach a statement, and mail in the return.
Custodial Parent Won’t Sign Form 8332
Sometimes it will be the non-custodial parent’s year to claim the kid, as per the divorce decree, but the custodial parent decides not to sign the Form 8332.
In this situation, it won’t do the non-custodial parent any good to try arguing with the IRS about how it’s their year to claim the kids.
Drill this into your head: THE IRS DOESN’T CARE ABOUT YOUR DIVORCE DECREE!
Lest you think I am just making this up, go to www.ustaxcourt.gov and you can find many cases — usually multiple cases each year — where the non-custodial parent takes the IRS to court because it’s their year (per the divorce decree) to claim the kids.
And the taxpayer doesn’t have a signed Form 8332. And the IRS says no-go on claiming the kid. And guess what the Tax Court says? They agree with the IRS. No Form 8332 = no claim to the kid under tax law, regardless of what the divorce decree says.
So what do you do? Your only option is to go to court against your ex to compel them to sign the form. What has worked for my clients is simply getting their divorce attorney involved, and usually a call to the ex’s attorney or sometimes a sternly worded letter, gets the ex to sign the form. I’ve never had it actually go to court, but it could.
Side Note About Divorce Decrees
Almost all divorce decrees that I see are absolutely awful when it comes to taxes and the kids. “This spouse can claim the dependency exemption, this spouse can file as head of household, this spouse can claim daycare expenses.”
This is what you need to know about taxes and divorce:
- Only the custodial parent is entitled to claim the kid as a dependent and ALL tax purposes
- But the custodial parent can waive the dependency claim and child tax credit by signing a Form 8332 to allow the ex to claim those 2 items
- If a Form 8332 is in play, all other tax benefits belong to the custodial parent. They can file as head of household, claim daycare expenses, and claim the earned income credit relating to that child. They just can’t claim the child as a dependent, and can’t claim the child tax credit relating to that child.
*-Under the Tax Cut and Jobs Act there is no longer a deduction (for 2018-2025 anyway) for dependency exemptions; however, you still claim dependents on the return.