“The hardest thing to understand in the world is the income tax.”
Unfortunately it’s that time of year again and tax day is right around the corner. With that in mind I thought it would be timely to take a minute to discuss an issue which frequently arises following a divorce where minor children are involved.
Who gets to claim the tax deduction for the children?
The basic rule is following a divorce regarding this issue is that the custodial or domiciliary parent gets to claim the child or children’s tax deduction for both federal and state taxes. However, as we all know, there are always exceptions to every rule.
For example, the parties can always agree between themselves who gets to claim the child or children, whether they will alternate years, or each claim certain children for certain years. Each client’s situation is different and I’ve drafted many Consent Judgments carved out vastly different ways to reflect parties’ agreements – some very simple, such as, Mom gets to claim daughter in even years and Dad gets to claim daughter in odd years, and some more complex, but each very personal to the parties’ unique situation. In fact, in certain instances one party can voluntary give the deduction to the other for financial reasons or as leverage during settlement negotiations. That being said, it is important to remember that in any given year only one person can claim the deduction specific to each child.
Another example of an exception to the general rule is if certain conditions are satisfied the court may award the non-custodial or non-domiciliary parent to claim the deduction. Louisiana Revised Statute 9:315.18 provides, in pertinent part that “[t]he non-domiciliary party whose child support obligation equals or exceeds fifty percent of the total child support obligation shall be entitled to claim the federal and state tax dependency deductions if, after a contradictory motion, the judge finds that both 1) no child support arrearages are owed by the obligor, and 2) the right to claim the dependency deductions or, in the case of multiple children, a part thereof, would substantially benefit the non-domiciliary party without significantly harming the domiciliary party.”
The second requirement of above language for the non-custodial or non-domiciliary parent to claim the tax deduction is tricky because it is not easy to justify that taking away a custodial or domiciliary parent’s tax deduction will not “significantly harm” the custodial or domiciliary parent, unless of course the custodial or domiciliary parent does not work and/or does not file taxes or does not make enough income for it to make a difference. If you have any questions about your specific situation, give me a call and we can talk about it, but in my opinion, this language confirms that the law is very much favored with the custodial or domiciliary parent having the tax deduction for the children.
Whatever your situation may be, whether you are the custodial or domiciliary parent, non-custodial or non-domiciliary parent, or in a situation involving a settlement agreement, I can work with you and your tax professional to develop a course of action and work towards a goal of attaining a tax-favorable outcome. I can also discuss with you the possibilities of modifying a current agreement or court order to allow you to the possibility of claiming the child or children for tax purposes.