Child Custody and Taxes: Who Gets the Exemption?

When you have a child, you’re eligible for a Dependent Tax Exemption (DTE) of the same size as the basic “I’m a person” exemption. But there’s a catch — if you and the other parent file separately, only one of you can claim the exemption. This makes sense; the IRS doesn’t want to give parents two exemptions from a single child. When you get divorced, however, this can lead to some complications.

The basic rule is that the parent that has physical custody of the child gets to claim the DTE. This also makes sense: in general, despite the best attempts of child support agreements, the parent with physical custody ends up paying for a majority of the child’s needs, so they should get the DTE to help make up the difference.

But what happens if you’re the noncustodial parent and you believe you should get the DTE? Well, you have to establish a few things first.

Is Your Child ‘Qualifying’?
In order to qualify as a DTE-providing child, the kid has to:

• Be a direct blood relative or adopted,
• Be younger than you,
• Be 19 or younger (24 or younger if they’re a student),
• Have lived with their parents for more than half of the previous year,
• Have not provided their own support for more than half of the previous year, and
• Not be filing jointly.

In general, most children will be qualifying — though many college students that live in dorms for three quarters of the year won’t.

Did the Custodial Parent Give You the Exemption?
Since the custodial parent gets ‘first dibs’ on the child’s DTE, you have to actually get them to fill out a form agreeing to release the DTE to you. In general, this requires them to voluntarily agree that you should get the exemption. That said, the Michigan Family Court has, in the past, issued a court order obligating a custodial parent to sign the form and thus turn the DTE over to their ex against their will.

It’s important to note that there are a few other tax benefits that follow the DTE. By getting the DTE from your ex, you’re essentially declaring that the child is your dependent, not theirs. That means that the Child Tax Credit, the Earned Income Tax Credit, and  potentially some other minor benefits will end up benefiting your tax return and not the other parent’s.

True 50/50 Custody and the Niggling Details
The obvious question becomes: what happens if my ex and I share genuine 50/50 custody of the child? Well, the tax code doesn’t recognize ideas like ‘custody.’ They measure by the number of nights the child spent at your house. Which means literally unless it’s a leap year, one of the two of you had at least one more night than the other.

Worse yet, if it is a leap year and both parents have an equal number of nights of custody, neither of them gets to claim the DTE — because the tax code specifies “more than” half the year, so a precise 50/50 split means neither parent qualifies. Sorry!