Divorce can be a complex process, and the financial implications often extend beyond child support. One area that can cause confusion for divorced parents in Texas is claiming their children as dependents on their tax returns. Here, we’ll break down the rules for dependency exemptions for children of divorced parents and how a Texas family law attorney can help ensure you’re maximizing your tax benefits.

Understanding Dependency Exemptions

The concept of a “dependency exemption” has been replaced by the “Child Tax Credit” in recent tax years. However, the basic principle remains the same. The parent who can claim their child as a dependent gets to reduce their taxable income, resulting in a lower tax bill.

Who Gets to Claim the Child?

In Texas, the general rule follows a “residency test.” The parent with whom the child lived for more than half of the year is usually considered the custodial parent and gets to claim the child as a dependent.

Consider Sarah’s Situation:

Sarah and Michael divorced in Texas last year. Their son, Ben, spends slightly more nights with Sarah due to her work schedule. This means Sarah would typically be eligible to claim Ben as a dependent. However, Sarah and Michael prioritize keeping their finances separate, and Michael earns a significantly higher income. Claiming Ben could provide a much bigger tax benefit for Michael.

Alternatives and Exceptions

There are a few ways Sarah and Michael can navigate this situation:

  • Release Form (Form 8332): Sarah can voluntarily relinquish her right to claim Ben by filing a Release of Claim to Exemption for Child by Custodial Parent (Form 8332) with the IRS. This allows Michael to claim Ben as a dependent.
  • Shared Custody with Equal Time: If the nights spent with each parent are truly equal (within a few nights), the parent with the higher Adjusted Gross Income (AGI) gets to claim the child.
  • Alternating Years: In some cases, parents can agree to alternate claiming the child in different tax years. However, this requires strict adherence to the residency test for each year.
  • Multiple Children: In cases where there are two or more children, each parent may be able to claim one child, which may maximize the tax benefit for both parents.

The Importance of Legal Guidance

Tax laws can be intricate, and the situation regarding divorced parents and child dependency can get even more complex. Here’s where a Texas family law attorney with expertise in tax implications of divorce becomes crucial.

  • Understanding Your Specific Situation: An attorney can analyze your specific custody agreement, living arrangements, and income levels to determine the optimal course of action for claiming your child as a dependent.
  • Negotiating with Your Ex-Spouse: If you need to reach an agreement with your ex-spouse regarding claiming your child, such as utilizing a Release Form, your attorney can guide you through the negotiation process and ensure a fair outcome.
  • Ensuring Compliance: Tax laws are subject to change, and your attorney can stay updated on the latest regulations to ensure you’re claiming your child correctly and avoiding potential tax penalties.

Contact Lundberg Law Today

Don’t leave money on the table! If you’re a divorced parent in Texas with questions about claiming your child as a dependent on your tax return, contact family law attorney Gregg Lundberg today. We can review your specific circumstances and help you develop a strategy to maximize your tax benefits while ensuring compliance with federal and state regulations.

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