Tax Exemptions for Minor Dependents - Indiana
Do you have kids? Do you have an ex (or a soon-to-be ex)? If so, then you have some figuring-out to do, because it is tax time, and who gets the tax credits for the kids is one of the most fought-about issues in divorce and custody cases.
Fortunately, the Indiana Child Support Guidelines ( http://www.in.gov/judiciary/rules/child_support/) offer some guidance on this question. Here is what the Guidelines have to say about the right to claim the minor tax exemption for your kids:
Tax Exemptions. Development of these Guidelines did not take into consideration the awarding of the income tax exemption. Instead, it is recommended that each case be reviewed on an individual basis and that a decision be made in the context of each case. Judges and practitioners should be aware that under current law the court cannot award an exemption to a parent, but the court may order a parent to release or sign over the exemption for one or more of the children to the other parent pursuant to Internal Revenue Code § 152(e). To effect this release, the parent releasing the exemption must sign and deliver to the other parent I.R.S. Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents. The parent claiming the exemption must then file this form with his or her tax return. The release may be made, pursuant to the Internal Revenue Code, annually, for a specified number of years or permanently. Judges may wish to consider ordering the release to be executed on an annual basis, contingent upon support being current at the end of the calendar year for which the exemption is ordered as an additional incentive to keep support payments current. It may also be helpful to specify a date by which the release is to be delivered to the other parent each year. Shifting the exemption for minor children does not alter the filing status of either parent.
The noncustodial parent must demonstrate the tax consequences to each parent as a result of releasing the exemption and how the release would benefit the child(ren). In determining when to order a release of exemptions, it is recommended that at minimum the following factors be considered:
(1) the value of the exemption at the marginal tax rate of each parent;
(2) the income of each parent;
(3) the age of the child(ren) and how long the exemption will be available;
(4) the percentage of the cost of supporting the child(ren) borne by each parent;
(5) the financial aid benefit for post-secondary education for the child(ren); and
(6) the financial burden assumed by each parent under the property settlement in the case.
That is an awful lot of information to consider, so let me break it down for you: The court in your case doesn’t have the authority to award an exemption to anyone, BUT it DOES have the power to order that one parent RELEASE the exemption to the other parent. The default is that the exemption goes to the custodial parent, unless the court orders it released to the other parent. Releasing the exemption involves the custodial parent completing a form ( http://www.irs.gov/pub/irs-pdf/f8332.pdf) and giving it to the noncustodial parent. The noncustodial parent then attaches the form to his or her tax return when filing.
So, who’s going to be entitled to claim the kids, anyway? Again, the default is that the custodial parent gets the exemptions. But if you are the noncustodial parent, you may be able to get a court order for the release of the exemption to you. To do so, you will need to file a petition with the court (the same court that handled, or is handling, your divorce/paternity/custody case). You will have to prove that you having the exemption would be beneficial to the kids. The court is going to look at factors including the dollar value of the exemption to you vs. to the other parent, each parent’s income, the age of the child(ren) and how many more years an exemption will be available for him/her/them, the percentage of the cost of supporting the kids that each parent is paying, the financial aid benefit for the kids’ college expenses, and, in cases of divorce, the financial burden each of you was left with under the terms of the property settlement. So be prepared to tell (and show) the judge exactly why you think it’s better for the kids that you get the exemption.
And remember, noncustodial parents are only allowed to claim the exemption if they are at least 95% current on their child support obligation – so make sure you’re paid up before you claim the kids.
If you have any questions about this topic, or about divorce, custody, support, or other family law issues, here’s how to get a hold of me:
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