Determining the Custodial Parent:
The custodial parent is defined as the one with whom the child lived for the greater part of the year. This parent typically has the right to claim the child as a dependent. irs.gov
Releasing Dependency Claims:
The custodial parent can allow the noncustodial parent to claim the child as a dependent by providing a written declaration, commonly done using Form 8332, "Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent." The noncustodial parent must attach this form to their tax return. irs.gov
Tax Benefits Allocation:
Even if the noncustodial parent claims the child as a dependent, certain tax benefits remain exclusive to the custodial parent, including:
Head of Household filing status
Earned Income Tax Credit (EITC)
Child and Dependent Care Credit
The noncustodial parent, upon receiving the dependency claim release, may be eligible for:
Child Tax Credit (CTC)
Credit for Other Dependents
It's important to note that child support payments are neither deductible by the payer nor taxable to the recipient. eitc.irs.gov
For comprehensive guidance, refer to IRS Publication 504, "Divorced or Separated Individuals," which provides detailed information on the tax implications of divorce, including dependency claims and associated tax benefits.
Understanding these rules ensures compliance with tax laws and helps both parents maximize their eligible tax benefits post-divorce.