FYI-Flint Divorce Bankruptcy Attorney Terry R. Bankert 235-1970, www.attorneybankert.com asks DID YOU KNOW?.From Creative .Nuts and Bolts Tax Tips for Divorces with Children
By Mary V. Ade, Stout Risius Ross, Southfield
A. How Do I Qualify to File as Head of Household
In general, you must meet all the following requirements to file as head of household.
- You are unmarried or “considered unmarried” on the last day of the year.
- You paid more than half the cost of keeping up a home for the year.
- Your home was the main home of your child for more than half the year.
- You must be able to claim an exemption for the child. However, you meet this test if you cannot claim the exemption only because you waived the right to claim the child pursuant to your divorce decree.
B. What if My Ex and I Have the Child an Equal Amount of Time?
If the child lived with each parent the same amount of time during the year, the parent with the higher adjusted gross income has the right to the head of household filing status.
C. Who Claims the Exemptions for Our Children?
In most cases, a child of divorced or separated parents will qualify as a dependent of the custodial parent under the rules for a qualifying child. However, the noncustodial parent may be able to claim the exemption for the child if the special rule (discussed next) applies.
- Special rule for divorced or separated parents. A child will be treated as the qualifying child or qualifying relative of his or her noncustodial parent if all of the following apply.
- The parents:
- Are divorced or legally separated under a decree of divorce or separate maintenance,
- Are separated under a written separation agreement, or
- Lived apart at all times during the last 6 months of the year.
- The child received over half of his or her support for the year from the parents.
- The child is in the custody of one or both parents for more than half of the year.
- The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return.
- If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater part of the rest of the year.
- ExampleUnder the terms of your divorce, your child lived with you for 10 months of the year. The child lived with your former spouse for the other 2 months. You are considered the custodial parent.
- Written declaration The custodial parent must use either Form 8332 (Exhibit A) to make the written declaration to release the exemption to the noncustodial parent. The noncustodial parent must attach the form or statement to his or her tax return.The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. If the exemption is released for more than 1 year, the original release must be attached to the return of the noncustodial parent for the first year, and a copy must be attached for each later year.
For tax years beginning after July 2, 2008 (the 2009 calendar year for most tax payers), new rules apply to allow the custodial parent to revoke a release of claim to exemption that was previously released to the noncustodial parent on Form 8332 or similar form. The revocation is effective no earlier than the tax year beginning in the calendar year following the calendar year in which the custodial parent provides, or makes reasonable efforts to provide, the noncustodial parent with written notice of the revocation. Therefore, if the custodial parent provides notice of revocation to the noncustodial parent in 2009, the earliest tax year the revocation can be effective is the tax year beginning in 2010. You can use Part III of Form 8332 for this purpose. You must attaché a copy of the revocation to your return for each year you claim the child as a dependent as a result of the revocation.
If the divorce or separation agreement went into effect after 1984 and before 2009, the noncustodial parent can still attach certain pages from the decree of agreement instead of Form 8332. For any decree or agreement executed after 2008, Form 8332 or similar form must be used.
Caveat: If the revocation is in violation of a decree or judgment, the noncustodial parent will have recourse in court to enforce the judgment.
E. Who Can Take the Child Tax Credit, the Credit for Child Care Expenses, the Exclusion for Dependent Care Benefits, and the Earned Income Credit?
If a child is treated as the qualifying child of the noncustodial parent, the noncustodial parent can claim an exemption and the child tax credit for the child.
The following tax benefits are available only to the custodial parent:
- Head of Household filing status
- Credit for Child and Dependent Care Expenses on form 2441 (Exhibit B)
- Exclusion for Dependent Care Benefits on form 2441 (Exhibit B)
- Earned Income Credit on Form 1040 Schedule EIC (Exhibit C)
F. I Am Going to Remain in the Marital Home Until My Youngest Child Graduates from High School - When the Home Is Sold, Can My Ex and I Both Claim A $250,000 Exclusion from Gain?
A home must be owned and used be as a principal residence by the taxpayer for two (2) out of the five (5) years preceding the sale. In the above examples, the husband retained an ownership interest in the home but would not necessarily satisfy the use requirement absent a special provision. Internal Revenue Code Section 121 provides that the use of the home by the former spouse is attributed to the other spouse, if specifically provided for in the judgment or settlement agreement.