Signed Declaration Required for Noncustodial Parent's Tax Breaks

Joint custody is common today when parents divorce, but it does not automatically confer the right to claim a dependency exemption or child tax credit for one parent or the other. Generally, the right to claim tax breaks is based on physical custody-the parent with physical custody of the child for the greater part of the year can automatically claim these breaks.

Tie-breaker rule

What happens if the child resides with each parent for exactly the same amount of time? Under a "tie-breaker rule" for this situation, the parent with the greater adjusted gross income is entitled to the tax breaks.

Impact of divorce decree

A divorce decree or separation agreement may award the dependency exemption to the noncustodial parent. This does not override federal law, which gives the tax breaks to the custodial parent unless that parent waives the right to claim them.

For example, say parents divorce and are awarded joint legal custody of their minor child. The couple's child lives with the mother, who has physical custody; the father has generous visitation rights. The divorce decree says the father can claim a dependency exemption for the child. If the mother claims the exemption, the father is without recourse under federal tax law (there may be a remedy in state court).

To claim the exemption in this case, the mother must sign a waiver of the right to claim the exemption. Form 8332 or its equivalent must be attached to the father's return. Absent this attachment, the father cannot claim the exemption for the child or any other related tax breaks.

Importance of exemption rights

This year, there is an additional wrinkle to claiming the exemption: The parent who does so can receive a $300 rebate for the child. The child must be under age 17, and the parent must personally qualify for a rebate check.

Source: Michael Artayet, TC Summary Opinion 2008-34