Claiming a dependent on one's taxes is typically a straightforward procedure. However, in some situations in New Jersey and elsewhere, more than one individual might try to claim a child as a dependent for tax purposes, which muddies this process. This is not uncommon following a divorce.
Claiming a dependent can impact one's taxes in a major way. For instance, there is an exemption for a dependent, and the person claiming the dependent can claim the filing status of Head of Household. In addition, there are applicable tax credits: for instance, the Earned Income Tax Credit, Child Tax Credit and Child and Dependent Care Tax Credit.
If a divorce agreement does not outline which spouse can claim the exemption for a dependent, the IRS uses several tie-breaker rules to determine who gets the exemption. First, the parent who keeps the child the longest during a tax year can claim the child as a dependent. If both parents keep the child for equal lengths of time, the parent whose adjusted gross income is the highest can claim this exemption, assuming that he or she has given the child more support. If one parent claims the exemption and then the other files his or her taxes and does the same thing, the second parent's tax return will end up being rejected, as the IRS does not address such disputes upfront.
Divorce can be a stressful experience both financially and emotionally, especially when children are involved. However, the more that divorcing parents in New Jersey can try to see eye to eye and achieve a settlement agreement on their own with the help of an attorney, the higher their chances of having a relatively amicable co-parenting experience down the road. This can benefit both the parents and their children long term.
Source: newstimes.com, "What to Do When Divorced Parents Both Want to Claim the Same Dependents", Feb. 6, 2017