Child Support Exemption

If you pay or receive child support, the Internal Revenue Service has a set of rules to control the deductions and exemptions that you are allowed due to payment or receipt of the child support funding.

A special rule applies for determining who gets the exemption for a child in the case of a divorce or legal separation. If you're the custodial parent, you can claim the child as a dependent. However, the noncustodial parent can claim the Dependent Exemption and the Child Tax Credit for the child with the consent of the custodial parent.

Terms of a divorce settlement determine how child support will affect your taxes.

The parent making the child support payment can not deduct it from income and the parent receiving the payment does not have to claim it as income. For child support to remain non-taxable, it must be designated in the final divorce decree as “child support.”

Child Tax Exemption:
To claim someone as an exemption you must provide more than half of that person’s total support in a calendar year.

To determine which Parent gets the Child Tax Exemption the parents must be:

• Divorced or legally separated under a decree of divorce.
• Legally separated under a written separation agreement.
• Living apart at all time during the last six months of the calendar year.
• One of both parents provides more than half the child’s total support for the year.
• One or both parents have custody of the child for more than half the calendar year.

Rules state that the parent who has custody for the greater part of the year is the custodial parent and that the parent will be treated as the person who has provided more than half of the child’s support. If your ex-spouse pays more toward the child’s expenses than you do but you spend more time with the child and are responsible for the majority of child care you will get the child dependency exemption and you can claim the child as your dependent.

The non-custodial parent can claim the exemption if both parents agree and the following criteria are met:

• A written agreement signed by the custodial parent stating that they will not claim the child as a dependent.
• A final decree of divorce that states the custodial parent will not claim the exemption for the tax year and the non-custodial parent attaches the appropriate documentation to their tax return.
• A final decree of divorce that provides for the non-custodial parent to claim the child as a dependent with a statement that $600 or more was given in support to the custodial parent.

The non-custodial parent must fill out a form 8332 from the IRS. Both parents must sign the form and then be attached to the non-custodial parent’s tax return.

The custodial parent may still qualify as Head of Household, and may be eligible for the Child Care Credit, Exclusion for Child Care Benefits and Earned Income Credit for that child. The non-custodial parent can't claim these benefits even though that parent can claim the exemption.