How Will Your Custody Agreement Impact Your Taxes?

Ask any Doylestown child custody lawyer, and they’ll tell you many of their clients are in a pretty rough emotional state.

Divorce is never easy, but it’s important not to lose sight of the practical, nuts-and-bolt issues, such as the tax implication of your custody arrangement.

Why is this important?

The parent who can claim children on their tax return can write off $4,000 per child, and get nearly $3,000 more from a standard deduction.

This parent can also deduct as much as $3,000 a year for child care expenses, while accessing substantial tax credits such as the earned income tax credit and child tax credit.

How does the IRS determine which parent gets tax benefits?

In most cases, the parent who has custody of children for a greater part of the year can claim them as dependents when tax time arrives.

But things get tricky when parents have joint custody, with the children spending 50 percent of time with one parent, 50 percent with the other.

In these cases, the IRS has what are known as “tiebreakers” to decide:

• In situations where only one of the two caretakers is the child’s actual parent, that’s the person who gets to claim the child as a dependent.
• When both parents can claim the child as a qualifying dependent, and the child had lived with both parents an equal amount of time, the parent with the higher adjusted gross income (AGI) will claim the child as a dependent.
• In cases involving two non-parental caregivers, the caregiver with the higher AGI will claim the child as a dependent.

How can tax credits affect my custody arrangement?

As we noted above, claiming children as dependents offers significant financial benefits, and this can be a reason to adjust child support payments up or down.

And if one parent meets the IRS income guidelines and is able to get those tax credits, this might lead them to compromise on other aspects of the custody arrangement.

What happens if my ex decides to claim the kids despite our arrangement?

You can spend long hours hammering out an arrangement with your Doylestown child custodylawyer, only to have a less-than-scrupulous ex-spouse claim your children on their tax return.

If this happens, and if they manage to file their taxes first, the IRS will accept their claim and deny yours, even though you are – technically – in the right.

But don’t panic. Talk to an attorney, who can provide the IRS with the proof they need. Typically, when the IRS gets more than one tax return claiming the same child as a dependent, they will audit the taxpayer they believe is in the wrong.

(Frankly, the words “IRS” and “audit” should be reason enough to convince you not to attempt to claim dependents you’re not supposed to claim.)

How a Doylestown child custody lawyer can help you

If you’re in the process of getting a divorce, and need a Doylestown child custody lawyer, turn to the firm of Penglase & Benson.

Our attorneys have spent decades helping people through their divorce proceedings while also keeping in mind the best interests of client’s children. Contact us today to learn how we can craft a custody agreement that works for you and your children.