The divorce paperwork has been completed, agreements have been reached and child custody has been decided. Both individuals can finally breathe a sigh of relief and begin to look to the future. For most Florida couples who are in the process of finalizing their divorce or who have recently done so, this is a time of mixed emotions and financial concerns. With April and the income tax deadline just around the corner, their thoughts also turn to relevant tax issues.
One tax item to consider is who will claim the dependent tax credit on taxes. This can be a critical decision due to the fact that the more dependents one is able to claim, the lower the taxes the individual will be required to pay. There are several different ways that this issue can be decided.
According to the IRS, the parent who has primary custody of the child or children is the one who is entitled to the tax exemption. However, in our ever-changing society, custody is often shared with the children spending a relatively equal amount of time with both parents. It can become as complicated as determining the home at which the child spent the most nights throughout the year.
Another way to determine who will claim this exemption is through agreement. In the divorce decree, it can be stated that a particular parent will maintain the exemption or that the exemption claim will alternate each year. In these cases, the IRS will typically go along with the agreement.
Florida couples who are in the process of completing their divorce agreement may also want to consider their tax options as a part of this agreement. This is a topic that they will want to discuss with their legal and financial advisors. Dependent tax exemptions can significantly alter the amount of taxes owed.
Source: The Huffington Post, Children of divorce: Who gets the tax exemption?, Stann Givens, March 13, 2014