Children are miracles. Little bundles of joy that drool and poop on everything. But still so adorable. And then they grow into angsty teenagers that hate us. Precious. And eventually they become working adults that we can share good conversation with. Unfortunately, sometimes they even have to wipe the drool off of our faces!

Amongst all of those other pros and cons, I would be a fool if I didn’t mention the tax advantages children offer!

I must be in a tax-y mood. Just yesterday I went over ways to check your property taxes by address. And now today… how to claim your child on your tax return.

Who Can Claim the Child?

In order to claim a child, they must meet four criteria. This is very important for split custody arrangements.

• Relationship – The claimed dependent must be your child, step child, adopted child, foster child, brother or sister (that you are a guardian of), or a descendant of one of the aforementioned options (e.g. a nephew or grandchild)
• Residence – The dependent must live with you for more than half of the year.
• Age – The dependent must be under 19 by the end of the year OR under 24 if they are a full-time student OR any age but permanently disabled
• Support – The dependent did not provide more than half of their own support during the year.

Now what would happen if two or more people claimed the same child?

The IRS will use “tie-breakers” to determine which taxpayer gets to claim the dependent. These tests are listed in priority:

• the parent,
• the parent with whom the child lived for the longest time during the year,
• if the time was equal, the parent with the highest adjusted gross income,
• if no taxpayer is the child’s parent, the taxpayer with the highest adjusted gross income.

So, if you are in a split custody agreement, try and keep track of what nights your child spends with you. Given that there are 365 days a year, most likely one parent will have the child more than the other by at least a few days. Not following these rules may lead to both parents claiming the child which is a guaranteed audit.

How Does the IRS Look at Child Support?

There are two parties that have vested interest in the answer to this question.

For the payer of child support, it is not a tax-deductible expense.

For the payee of child support, it is not considered taxable income.

Can You Split the Tax Benefits?

Once upon a time, parents who were separated could split the tax benefits. I would claim our child as my dependent, you would get the child tax credit and earned income credit. Not anymore. Claiming the child as a dependent is tied to the child-related tax benefits.

Now, if you are divorced and the custodial parent has agreed to release their claim for the dependent, that is acceptable. This can be done permanently (every year as long as the child qualifies), every other year, every third year, etc. This is something that will get worked out in the divorce.

Input/Questions

Do you have any extra knowledge to give my experienced readers? Any hoops you had to jump through to get tax benefits for your children?

Below you will find a few links to some PDF’s on the IRS website for forms that may come in handy. Feel free to suggest a few and I will add them!

Resources:

Child Tax Credit [IRS, PDF]

Additional Child Tax Credit [IRS, PDF]

Multiple Support Agreement [IRS, PDF]

Release of Claim to Exemption [IRS, PDF]