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Child custody: Tax exemptions may be negotiated in Texas

The decision to file for divorce can be daunting for many people. When a child or children are involved, a divorcing parent may understand that the issues of custody and support may need to be addressed. Under Texas law, family courts seek to assess the best interests of the child in child custody disputes.

Custody issues can involve two separate prongs; legal custody involves the decision making authority for things like education, religion, medical care for the child and similar important matters involving the child. Physical custody is related to where the child (or children) will live. Often, courts may find it in the best interest of the child to spend significant amounts of time with each parent under a joint physical custody arrangement.

However, even in joint custody arrangements, the total amount of time a child stays with each parent may vary widely.

As we head toward the tax filing deadline, many parents may wonder how the IRS views custody arrangements for the purposes of which parent may claim the child as a dependent on income tax forms. Federal income tax issues are not a matter of Texas law.

The IRS recognizes that the custodial parent is entitled to claim a child as a dependent for the purposes of the dependency exemption. Notably the IRS defines the custodial parent as the parent with whom the child spends the greater number of nights in a given year.

But, a couple may agree to modify that general rule in a divorce settlement and the IRS will respect that agreement. For parents who have divorced since 2008, the IRS has a form dedicated to this purpose -- IRS form 8332. The IRS says that the custodial parent needs to sign the form to be attached to the noncustodial parent’s tax return.

Some divorcing parents may agree to alternate years in claiming the children for tax purposes, while others may choose other arrangement to meet their unique circumstances.

It is also important to note that the exemption differs from child support issues. The IRS says that a parent who pays child support cannot deduct the payment, while the support is not taxable income for the parent who is receiving the payments.

Family law issues can be complex. A Dallas divorce lawyer can provide advice and representation to a parent seeking marriage dissolution.

Source: The Huffington Post, “Children of Divorce: Who Gets the Tax Exemption?” Stann Givens, March 13, 2014

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