Children and Taxes: Dependency Exemptions after Divorce

 Posted on October 20,2014 in Divorce

Divorce is a process with many different moving parts, and people going through it often focus on the major ones, issues like child custody and property division. While these are absolutely life-altering decisions, there are other, smaller questions that can still be incredibly important. One such question is which parent gets to claim the child as a dependent after the divorce. While this seems to be a fairly minor point of tax law, it is actually quite important. According to IRS regulations for 2013, a person's being able to claim the dependency exemption could save them almost $4,000, and that is just for a single child. The answer to this question turns out to be a little complex and it depends on both IRS rules and Illinois law.

The IRS Answer

The IRS answer is known as the Custodial Parent Rule, and it can be found in section 152 of the Internal Revenue Code. It states that the custodial parent is the only one who gets to claim the exemption. If there is a joint custody agreement in place, then the parent who has custody of the child for more of the time qualifies as the custodial parent. However, there are two exceptions to this rule. First, if the parents have a multiple support agreement in place, then this rule does not apply. Second, and more importantly, the parents are allowed to agree between themselves who gets to claim the child's dependency exemption, which is where Illinois law gets involved.

Illinois Law

Illinois courts have the authority to force one parent to give the dependency exemption to the other as part of a divorce decree. The courts can also shift the exemption between the parents as part of the post-decree divorce proceedings. For instance, in at least some districts in Illinois the court will award the dependency exemption to the parent who is contributing more of the support to the child from a financial perspective. Courts in Illinois have actually taken a fairly sophisticated approach to determining exactly what “more support” means. For example, there have been some very close cases where the parents have been contributing very nearly equal amounts to the child's support. In those cases, the courts have assigned an alternating dependency exemption. Each parent was allowed to claim the exemption in alternating years. In the end, courts have a wide degree of latitude to determine the answer to this question as they see fit, so it is important for parents to understand their divorce decree when it comes time for them to fill out their taxes.

If you are considering filing for divorce or have recently been served with divorce papers, contact an experienced DuPage County divorce attorney today. Our firm is here to help you through this legally complex and emotionally difficult time.