IRS TAX EXEMPTION FOR CHILDREN AND DIVORCE AGREEMENTS
In 2008, the IRS amended Code Section 152(e), which addresses child dependency exemptions. The changes affect the procedures and means for claiming the exemption. The new rules should be carefully followed to ensure that the exemption is taken by the parent entitled to it, and that the appropriate language is contained in divorce or separation agreements to reflect the current state of the law.
- A divorce agreement or court order can no longer be used as a substitute for Form 8332. The parties must actually complete the form.
- Beginning in 2009, the custodial parent is the one with whom the child resides the greater number of nights during the year, regardless of the terms of the divorce decree.
- Beginning in 2009, the custodial parent can unilaterally revoke the release of a child exemption for calendar years 2009 and beyond regardless of when the release was made.
In light of these developments, all non-custodial parents who plan to claim the exemption must obtain a signed Form 8332. In addition, divorce or separation agreements should address the potential for a release being improperly revoked after it is given.
The parent claiming a dependency exemption is also entitled to benefit from a Child Tax Credit and any allowable Hope or LIfetime Learning Educational Tax Credits. Keep in mind that the exemptions and credits are phased out as the income of the parent increases. This should be factored into decisions as to when and how to claim the exemption.
For 2009, the Chidl Tax Credit phases out from $75,000.00 to $95,000.00 (of Adjusted Gross Income) and Hope or Lifetime Learning Educational Tax Credits phase out from $48,000.00 to $58,000.00 for single and head of household filers. These credits are generally more valuable to lower and middle income filers than the dependency exemption itself.
As with all tax issues in a divorce or separation agreement, you should consult an experienced tax attorney or accountant in order to full understand all of the ramifications of your agreement.
I filed for divorce 2 years ago and my spouse still has not sign due to my medical insurance.Can I purchase a home at this time or do I need to finalize my divorce?
My ex-husband and I got divorced August 2004 in the state of Florida. In the divorce decree it clearly states that in occordance to IRS section 152(e), my ex-husband will be allowed to claim our child every odd year and I would be allowed to claim him every even year. I am the primary provider and have had him in my sole custody since late 2005 with very few visits with his father. His average visitation has been a maximum of two weeks during any given year with the exeption of a 5 week summer visitation in 2009. According to the newly amended section 152, do I still have to give up claiming my son as a dependant every odd year even though I have primary custody well over 6 months out of the year? Am I obligated to fill out the IRS Form 8332 as the divorce decree states? He does pay his monthly child support every month on time but feel I should be allowed to claim him every year since I contribute well over the $13000.00 child support. I am the main caretaker, emotionally and physically from year to year. Do I need to take this up with my attorney or is this a simple IRS rule that supercedes the divorce decree? Thank you for your time.
Reply to Susan (late but better then never):
Keep in mind that tax law (and related procedures) is completely separate from civil law. This change by the IRS in how it processes child exemptions will probably change how divorce decrees are written, but you need to check with your attorney. You should be safe and petition for a modification to be safe.
Also, keep in mind that the change becomes effective the following year. So, if he claims the child for 2009, then it's too late to revoke.