The dependent exemption can be quite valuable to taxpayers when they file their tax returns. Provided the dependent meets all the requirements to be considered a qualifying child or qualifying relative to the taxpayer, the filer is eligible to claim a dependent exemption.
The IRS has certain rules in place as stated in the tax code regarding who can be claimed as a dependent. The Internal Revenue Code (IRC) §152(c)(1)(B) states that in order to be a qualifying child, the dependent must have lived with the taxpayer for more than half of the entire tax year. In the case of a divorce, typically the custodial parent is the one who can claim the child. The parent who doesn’t have the child living in their home for most of the year generally has a hard time, if ever, outright claiming a non-custodial child for a dependency exemption.
Divorced Parents
There is one special rule that exists for divorced parents that can allow a noncustodial parent to claim the dependent exemption. The noncustodial parent is the one who doesn’t have the child for the largest part of the year. This parent may claim the child if both following are true:
- The custodial parent signs a written declaration stating that he or she is relinquishing their right to claim the child for a specific year or set of years
- The noncustodial parent supplies the written declaration as an attachment to the appropriate years’ tax return.
This written declaration is necessary and important. The parent relinquishing the claim must add the phrase: “in such manner and form as the Secretary may by regulations prescribe” to the declaration. You can also supply IRS Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.
Form 8332
When a taxpayer who is a custodial parent of a dependent child signs a Form 8332, they are stating two different things:
- They are releasing the right to claim the dependent exemption for the child
- They will not claim the exemption.
The custodial parent has the option of releasing the exemption to the other parent for any duration of tax years, including the current year only, every year in the future, or a set range or specific years. The noncustodial parent will need to have a form signed for every dependent they wish to claim.
If a Form 8332 is not available, the tax code permits custodial parents to use any other form of written documentation instead. The release must adhere to the substance of Form 8332 and shouldn’t be used for any other reason. In many cases, it would be difficult to obtain an exemption release that applies the same way as the Form 8332.
Child Tax Credit
According to IRC §24(a), the child tax credit can only be claimed by the taxpayer who has the right to claim the dependency exemption. That means that when a custodial parent relinquishes the dependency exemption for their child under 17, they also give the rights to claim the child tax credit to the noncustodial parent as well. By this same principle, the noncustodial parent can’t claim the child tax credit unless they have a signed release.
Divorce Decree
As of 2008, newly entered divorce decrees are not acceptable replacements for a Form 8332.
