Under normal circumstances, parents in North Carolina can claim dependent children on their taxes without any significant issues. However, this process can become complicated should two divorced parents attempt to claim the same child as a dependent. The ability to claim a child for this reason can lead to some valuable tax credits.
The personal exemption no longer exists because of tax law changes; although, the Dependent Care Credit is still available. The Child Tax Credit has also doubled. In some cases, who may claim these credits is determined by a divorce agreement. In the absence of such arrangements, the IRS considers several factors when determining who can legitimately claim credits.
For instance, the IRS typically considers which parent the child lived with the most during the applicable tax year. However, if joint custody has been granted, other factors usually need to be considered. For example, the IRS generally chooses the parent with the highest adjusted gross income since it’s assumed that they provide more financial support for the child. With non-parental claims or instances where parents cannot claim the child as a dependent, the claiming individual’s AGI must be higher than what was reported by either parent.
A parent who is going through a dependent-related dispute may want to contact the IRS Customer Service Department to initiate the tie-breaker rules. However, issues with tax credits could be avoided if an ex-spouse consults with a divorce attorney to work out a mutually acceptable arrangement. A lawyer may also recommend spelling out tax-related details in a custody, separation or divorce agreement.