Once a family has gone through a divorce and settled matters of custody, most Alabama parents believe that the issue of who can claim a child for tax purposes has also been effectively settled. In reality, however, there are ways that a non-custodial parent can still benefit from tax breaks tied to his or her child. This is an issue that should be considered during divorce and child custody negotiations, as the outcome can have a significant impact on one's taxes.
In order for a non-custodial parent to claim tax breaks based on one or more children, the custodial parent must formally cede his or her right to claim those dependents for that tax year. This can be accomplished by IRS Form 8332. In addition, the parents must be divorced at the end of the applicable tax year, or must have lived apart for at least six months of that year.
Once the paperwork is in order, the non-custodial parent can claim a child to access the child tax credit, higher education tax credits and tuition deductions. He or she can also claim interest paid on college loans, and take advantage of the dependency exemption deduction. This does not permit the non-custodial parent from claiming head-of-household status, however.
Having access to these tax advantages can make a big difference come tax season. The benefits make this an issue that should be considered during divorce and child custody negotiations. It is possible to agree to a schedule by which both Alabama parents take turns claiming one or more children on their taxes, and that agreement can become part of the final divorce paperwork.
Source: marketwatch.com, "After the divorce: Which parent gets child-related tax breaks?", Bill Bischoff, May 13, 2016