After finalizing a divorce, many separated parents later realize they need to know more about the tax implications of the child support agreement of their divorce settlement.
The matter of claiming a child as a dependent is important when declaring oneself as Head of Household (HOH) instead of a single-payer status. After all, a HOH taxpayer is entitled to a higher amount of personal deduction that reduces one’s taxable income.
Actually, dependency deduction as a means of increasing personal deduction has been discontinued. This was eliminated through the promulgation of the Tax Cuts and Jobs Act (TCJA). The Act officially took effect in 2018 through 2025. In its stead, there are several child-related tax breaks or tax credits available to a single parent deemed eligible to claim a child as a dependent.
Apparently, such tax matters can all be confusing to anyone who does not have full knowledge or comprehension about the tax changes that took effect in 2018. Newly divorced parents apparently had other things in mind at the time the TCJA took effect. The elimination of dependency deduction and the introduction of child-related tax breaks, were the least of their concerns during the painful breakup.
Even if we mention the general rules and requirements that qualify a single-parent, whether custodial or non-custodial, it would be wiser to hire a well-rounded tax preparer. That way, a divorced parent-taxpayer will have peace of mind regarding the accuracy of his or her income tax return; as well as be assured that the applicable tax breaks were considered in the determination of his or her taxable income.
General Rules on Who Can Claim a Child as a Dependent
Under IRS rules, only one of the divorced parents can name a child as his or her dependent. The custodial parent usually has the right to claim a child as a dependent, provided that child was under his or her care during the greater part of the tax year.
First off, the divorced or separated couple must have signed the official agreement within the tax year; or have lived separately for at least six (6) months during the tax year. If otherwise, the original claimant, even if he or she becomes a non-custodial parent after a divorce agreement, can still claim a child as a dependent and avail the related tax breaks for that particular year.
Secondly, it should be clear that child support money received by a custodial parent is not taxable income. In the same way, a non-custodial parent who opts to file a tax return using the itemized-deduction method, cannot include child support money in his or her list of deductible expenses.
Thirdly, a non-custodial parent can claim a child as his or her dependent only if the custodial parent accomplishes and signs Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, using IRS Form 8332. The declaration of release must be made on a per year basis, as the non-custodial parent’s claim for the tax year must always be supported by a copy of the IRS Form 8332 signed by the custodial parent.