Tax Aspects of Divorce in Ohio
IntroductionYour divorce or dissolution decree will name who the residential parent is (the IRS uses the term "custodial" parent). This designation is important for tax purposes because the IRS regulations allow you to qualify for additional tax benefits if you are the residential parent. If both parents have shared parenting, then the IRS requires the parties to determine who the "custodial" parent is based on the number of nights spent with each parent, and if a tie-breaker is needed, who has the higher adjusted gross income of the two.
Filing StatusThe custodial parent is eliglble for "Head of Household" filing status, which provides for tax liability calculations which are slightly higher than "Married Filing Jointly" but lower than "Single" or " Married Filing Separately." If you are the custodial parent, then you can select the "Head of Household" filing status (as long as you meet other criteria). Remember that your filing status is determined on the last day of the year, so if your divorce is final (i.e., Judge signs the order and the order is filed with the Court), on December 20, 20XX for example, someone is eligible for this status.
Tax Dependency Exemption and the Child Tax CreditAs custodial parent, you are entitled to claim your child or children as tax dependents and the exemptions that go along with it as long as you meet the test for each child. This exemption decreases the amount of taxable income subject to tax liability. If you do claim the dependency exemption, then you MUST also claim the Child Tax Credit. You cannot claim the dependency exemption and have your ex-spouse claim the child tax credit, or vice versa. The tax dependency exemption and the child tax credit are inseparable. As custodial parent however, you may have to sign IRS Form 8832 either because you do not meet the custodial parent test or your divorce decree requires you to do so. This form allows the non-custodial parent to claim your child as a tax exemption AND take the child tax credit. Do not try to use this as a source of punishment because if you do, you may have to face contempt charges in the court you received your divorce or dissolution.