Divorce or separation isn’t just an emotional and logistical upheaval—it’s a financial maze. And one of the trickiest questions families face after separation is: Which parent gets to claim the kids on their taxes?
At JS Morlu, we’ve seen this scenario play out countless times. The answer isn’t always straightforward, but understanding the IRS rules can make the difference between maximizing your tax savings—or inviting an audit. Let’s break it down.
The IRS Rulebook: Qualifying Child Basics
For a child to be claimed as a dependent, they must meet all four “qualifying child” tests:
1. Relationship Test – They must be your child, stepchild, foster child, sibling, or a descendant (think grandchildren or nieces/nephews).
2. Age Test – They must be:
- Under 19 and younger than you, or
- A full-time student under 24, or
- Permanently disabled at any age.
3. Residency Test – The child must live with you for more than half the year.
4. Joint Return Test – They can’t file a joint return, unless it’s only to claim a refund.
Here’s a detail many overlook: “full-time student” means attending school for five calendar months, not necessarily consecutive ones. Online-only and job-training programs don’t count.
Custodial vs. Noncustodial: Who Has the Claim?
The IRS prioritizes the custodial parent—the one the child lives with most nights during the year. This parent usually gets first dibs on:
- Child Tax Credit (up to $2,000 per child under 17)
- Earned Income Tax Credit (EITC)
- Head of Household filing status
But what if custody is split evenly? That’s where IRS tiebreaker rules step in:
- The parent with more nights claims the child.
- If nights are equal, the parent with the higher Adjusted Gross Income (AGI) wins.
And here’s a curveball: family court rulings don’t override IRS law. A judge can assign custody, but the IRS decides who gets the tax benefits.
What About Noncustodial Parents?
In certain cases, a custodial parent can release their claim and allow the noncustodial parent to claim the child. This requires:
1. Divorce, legal separation, or written separation agreement.
2. The child receives over half their support from both parents combined.
3. The child lives with one or both parents more than half the year.
4. The custodial parent signs IRS Form 8332 to officially hand over the claim.
Form 8332 is binding for the duration specified—so think carefully before signing. Even with this release, certain benefits like the EITC and Child Care Credit remain exclusive to the custodial parent.
Tax Benefits at Stake
Here’s what’s on the line when claiming dependents:
- Child Tax Credit – Up to $2,000 per child under 17, subject to income limits.
- Child & Dependent Care Credit – Only available to the custodial parent, to offset childcare costs while working or job-hunting.
- Earned Income Tax Credit (EITC) – Exclusively for the custodial parent.
- Education Credits (AOTC & LLC) – Only the parent claiming the child as a dependent can claim these valuable education benefits.
- Student Loan Interest Deduction – Again, only for the parent claiming the dependent.
Each of these credits can dramatically change your tax liability—and in some cases, your refund.
Filing Status Considerations
Another major factor is your filing status. Many recently divorced taxpayers qualify for Head of Household (HOH) status, which often results in lower taxes than “Single.” To qualify, you must:
- Be unmarried or “considered unmarried” on the last day of the year.
- Pay more than half the cost of maintaining your home.
- Have a qualifying child or dependent living with you more than half the year.
This is where documentation matters. Mortgage statements, utility bills, and support records can make or break your case in an audit.
Support vs. Custody: Clearing the Confusion
One common misconception: the parent paying more money automatically gets the tax benefits. Not true. The IRS bases the custodial claim on where the child lives, not who foots the bigger bill.
That said, support does matter when determining eligibility for dependency exemptions. Housing, food, education, medical expenses, and clothing all count as support. If you’re in a 50/50 custody arrangement, keeping detailed support records can protect your claim.
Avoiding IRS Pitfalls
When parents can’t agree, both may attempt to claim the same child. This almost always triggers an IRS letter or audit. To avoid penalties, families should:
- Communicate: Agree upfront on who will claim which child each year.
- Put it in writing: Use IRS Form 8332 when necessary.
- Consult a tax advisor: Rules shift frequently, and mistakes are costly.
At JS Morlu, we’ve helped families structure dependency claims in a way that not only maximizes tax benefits but also prevents years of IRS disputes.
The Bigger Picture
Divorce is hard enough without the IRS adding fuel to the fire. But smart tax planning—paired with clear agreements—can smooth the financial turbulence. Whether you’re navigating custody arrangements, considering a dependency release, or planning for education credits, being proactive pays off.
At JS Morlu, our tax experts don’t just prepare returns—we build strategies. From high-net-worth individuals balancing trusts and estates to single parents ensuring compliance while stretching every dollar, our team helps protect what matters most: your financial stability and your children’s future.
Final Word
If you’re recently divorced or separated and unsure about how to handle dependents on your tax return, don’t leave it to guesswork. The IRS doesn’t forgive misunderstandings, but with the right guidance, you can stay compliant and optimize your benefits.
📞 Contact JS Morlu today for a consultation, and let us help you turn a stressful tax season into a confident financial strategy.