Former spouses face pressure at every turn in their post-divorce lives. As they each struggle to find their new independent futures, they will likely face various financial pressures with complex questions at every stage, especially when children are involved. The first post-divorce tax return often proves problematic.
Understanding tax returns for divorced parents
In general, there are two elements of the IRS tax return that divorced parents might find troublesome:
- Claiming a child as a dependent: The IRS is quite clear that only the custodial parent may claim the child as a dependent. While, historically, custody might have followed a split that included weekdays with one parent and weekends with the other, recent decades have seen a shift in mindset. Parents can now craft an intricate parenting plan agreement that favors a more even split. Co-parenting or a 50-50 division might add a layer of complexity to the tax return, but the fact remains that only one parent can claim the child as a dependent.
- Child support payments: While there are specific requirements centered on alimony and spousal support, the IRS is clear about child support payments. These payments are not considered taxable income and are neither deductible by the payer nor taxable to the recipient. This is a common source of confusion as divorced parents attempt to include all money paid or received on their tax return.
Under certain circumstances, the noncustodial parent can claim the child as a dependent. After meeting numerous eligibility criteria, the custodial parent can sign a release of claim to exemption form and the noncustodial parent can then claim the child as a dependent. This, of course, also means the custodial parent cannot claim the child as a dependent on the tax return.