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Who Gets the Kids (For Tax Purposes)

A common question we receive from a party to a divorce in which there are minor children is “Who gets to claim the children on their taxes?” After all, if you can claim your child as a dependent, you may qualify for the child tax credit or the earned income credit, which can significantly increase your tax refund.

Generally, the custodial parent will be entitled to claim the child as a dependent, since the child will reside with the custodial parent for more than one-half of the taxable year. However, the IRS has created a special rule for divorced parents, which will allow the noncustodial parent to claim the child as a dependent if the custodial parent signs a written declaration stating that he or she will not claim such child as a dependent for the year, and the noncustodial parent attaches such written declaration to his or her tax return.  Failure to attach the required written declaration will result in the noncustodial parent losing the dependency exemption.

This is something that Devin Seeliger learned the hard way. In 2014, he filed his 2013 tax return claiming his daughter as a dependent.  By doing this, he was able to file as head of household and claim the child tax credit.  However, Mr. Seeliger failed to obtain a written declaration from his ex-wife.  The IRS disallowed the exemption for his daughter.  Mr. Seeliger appealed to the United States Tax Court.  In front of the Tax Court, Mr. Seeliger argued that his divorce decree permitted him to claim the exemption.

In a decision issued September 11, 2017 (T.C. Memo 2017-175), the Tax Court found that Federal law, not State law, determines one’s eligibility to claim a deduction for Federal Income Tax purposes. Even though the divorce decree allowed Mr. Seeliger to claim his daughter as a dependent on his tax return, and receive the additional deductions and credits, the Tax Court disallowed the claim because he did not follow IRS requirements.  Mr. Seeliger was ordered to pay additional taxes, including penalties and interest.