If you’ve been through a divorce or separation that involves children, your court orders might define custody differently than the Internal Revenue Service. The IRS provides several tax benefits to those with dependent children, so it’s natural to want to know which parent is eligible to claim the credits. The IRS defines a custodial parent as one who has a child the most nights in a year. If you’re the custodial parent, you’re generally allowed to claim all eligible child tax benefits, unless you complete IRS Form 8332 to sign over certain benefits to the noncustodial parent.
Filing Status and Exemptions
A divorced or legally separated custodial parent can claim the head of household filing status, plus a personal allowance exemption for each child. The head of household status offers a greater standard deduction than a single filing status, plus lower tax rates and increases in certain tax credits. The IRS awards a personal allowance exemption for each person claimed on a tax return. These allowances yield a dollar-for-dollar reduction in taxable income.
Child Tax Credit
The child tax credit awards most custodial parents a tax benefit of up to $1,000 per child under age 17. As of June 2012, you must earn less than $75,000 if you file head of household, or $110,000 if you’ve remarried and file a joint return, to receive the credit. If your tax is reduced to zero and you have unused child tax credits for the year, you may be able to get a refund even if you do not owe any tax through the additional child tax credit benefit.
Dependent Care Credit
Custodial parents can claim expenses for child and dependent care, up to $3,000 per child. This credit covers your expenses for child care so you can work or look for work. You can’t include the cost of regular grade school tuition for this credit, and your child must be under 13 or physically unable to care for himself to claim the benefit. This credit can be used only to reduce your income tax to zero. Any leftover credit is not carried over or used on another part of your return. If you qualify for the dependent care credit and the child tax credit, your tax benefits could be maximized if you figure your dependent care credit first.
Earned Income Credit
The earned income credit is a tax benefit for those who earn low-to-moderate incomes. This credit can boost a custodial parent’s refund by up to several thousand dollars. You’re eligible to claim a child who is under 19, or under 24 and a full-time student. Eligible income ranges and the amount of credit you can receive changes each year, so you’ll want to check the IRS website for details. If you’ve remarried, you can’t claim the credit if you file a separate return from your new spouse.
With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.