What is the most important thing for a divorced or separated parent to know about filing tax returns?
In order to save on money on taxes, it is important to be sure to properly claim your child as an exemption. A child tax exemption generally offsets income, and reduces your taxes. If you have no income, it often makes no sense to fight over who gets to claim the child. Generally, according to IRS guidelines, the primary custodial parent gets to claim the child for taxes. If you can claim the child as an exemption, you may also be able to get tax credits, including tax credits for daycare expenses. If you have a child, you can also get a credit for a child up to age 17.
Keep in mind that this may affect child support. If a non-custodial parent is allowed to claim the child, it will reduce their taxes, increase their income, and have them pay more child support. Conversely, if a child support payor does not claim the child, make sure support is properly calculated considering there will be more taxes and less income, and therefore less child support paid.
When can someone else claim a child for taxes?
If a non-custodial parent pays so much child support that it exceeds 50% of the costs of raising the child, they should seek a court order allowing them to claim the child.
What is the best advice you can give the custodial parent when it comes to taxes?
File your tax returns as soon as you can if you will receive a refund so the other parent does not claim the child. Also, if a court order allows the other parent to claim the child, be sure your court order requires them to be current in child support obligations before they are able to do so.
What is the best advice you can give the parent who does not have custody?
Make sure you pay child support as ordered. If you pay more than 50% of the costs of raising the child, seek a court order allowing you to claim the child.
I recommend that parents cooperate, share financial information, and figure out who should get to claim the child to minimize taxes.