Your divorce is stressful.
You may be so focused on child custody that you are overlooking taxes. It’s easy to lose sight of taxes when your relationship with your child is on the line. Nonetheless, you should be asking your Charleston family law attorney: “What child tax deductions and credits will I get after I am divorced?”
The Tax Code includes many tax deductions and credits regarding children. Depending on what happens with child custody, you could save or lose thousands of dollars in taxes each year after you are divorced.
You May Be Able to Take Advantage of
Several Child Tax Benefits After Your Divorce.
As part of your divorce, you should discuss with your Charleston family law attorney these potential child tax benefits:
- Payment of child support
- The child tax exemption
- The child tax credit
- The dependent child care credit
- The earned income child tax credit
- Child health care expenses
- College and post-secondary education deductions and credits
Your ability to take advantage of these tax deductions and credits will depend on what happens with child custody in your divorce.
You Cannot Deduct Child Support Payments
From Your Taxable Income in Most Circumstances.
The Tax Code does not include a specific tax deduction for the payment of child support. Consequently, if you have been ordered to pay child support, you will not be able to deduct your child support payments unless you fit within one narrow tax provision.
If you negotiate a child custody settlement, your Charleston judge may allow you to combine alimony and child support into a single monthly payment, which would be called “family support.” If you do not distinguish in your child custody settlement agreement between the amounts paid for alimony and child support, the IRS may treat your entire “family support” payment as alimony. You would then be able to deduct from your taxable income the total amount that you pay each year in child support as well as alimony.
The Child Tax Exemption Could Provide You with a Large Tax Deduction.
The Federal Tax Code permits divorced or separated parents to utilize the child tax exemption under certain circumstances. The IRS has established the following broad requirements for this $3,700 child tax deduction.
- Your child must be (a) under age 19 at the end of the year, (b) under age 24 at the end of the year and a student, or (c) any age if permanently and totally disabled.
- The child must have lived with you for more than half of the year – absent special circumstances, such as specific terms in your child custody settlement agreement or divorce court order.
The general IRS rule is that the divorced parent with physical custody of the child for more than one-half of the year will get the child tax exemption. If you and your spouse have joint physical custody of your child (i.e., each parent with 50% of the time with the child), the child tax exemption belongs – in the absence of a child custody court order – to: (a) the parent who pays child support; or (b) if neither parent pays child support, the divorced parent with the higher adjusted gross income gets the child tax exemption.
Your Divorce Judge Can Award the Child Tax Exemption to You or Your Spouse.
The Federal Tax Code includes an important exception for determining which parent may use the child tax exemption after a divorce. The IRS and South Carolina divorce law, allow Charleston family law judges to award the tax exemption to the custodial parent or the noncustodial parent as part of a child custody settlement agreement.
You and your spouse should consider several factors in negotiating who will get the child tax exemption, including:
- Will the tax benefit offset some of the cost of paying child support, alimony, or both?
- Do you and your spouse have more than one child?
- Has one of you agreed to pay for exceptional expenses, such as extracurricular activities, private school tuition, or transportation for child visitation?
- Could your child benefit in college financial aid applications from being listed on the tax return of the divorced parent with the lesser income?
- Does one parent not have enough taxable income to benefit from use of the child tax exemption?
- Will either parent be able to use the child tax credit, dependent child care tax credit, or earned income child tax credit?
You and your spouse cannot claim the child tax exemption for the same tax year for the same child. However, if you have two or more children, you and your spouse can allocate the tax exemption on a per child basis as part of your child custody agreement. If you have only one child, you and your spouse can also allocate the tax exemption on an alternating calendar.
You May Also Be Able to Use the Child Tax Credit.
The Tax Code also permits a divorced parent to use a $1,000 child tax credit for children under the age of 17. To qualify for this credit, you must first satisfy the eligibility requirements for taking the child tax exemption and you must list your child as a dependent on your tax return. The IRS has explained in its Publication 972 other eligibility requirements for this child tax benefit.
As part of your child custody settlement negotiations, you will want to take a close look at how much you and your spouse earn. The benefit from the child tax credit will generally decline by a ratio of $50 for each $1,000 that you earn. If you have significantly more income than your spouse, the child tax credit may be worth much more to your spouse than it is to you.
You May Be Eligible for the Dependent Child Care Tax Credit.
Under the dependent child care tax credit, you may be able to claim a tax credit of 35% of your child care costs – up to $3,000 per year. You can claim this child care tax credit until your child is 13 years old. For more information concerning the technical requirements for this tax credit, you should contact a Charleston family law attorney or review closely IRS publication 503.
Single Parents May Also Benefit from Other Child Tax Credits and Deductions.
Before you agree to any child custody settlement agreement, you should discuss with your Charleston family law attorney each of the child tax benefits for which you may be eligible. For example, you may qualify for the earned income child tax credit, deduction of child medical expenses, the American Opportunity Tax Credit for college and post-secondary education, the lifetime learning tax credit, or other child-related tax benefits.
Child Custody Can Have a Big Effect on Your Tax Liability.
With so much at stake, you need the help of an experienced Charleston family law attorney. Please call me now at 843-800-2928or use the contact form to ask me questions. I will be glad to help you.
Working together, we will build a better future for you and your child in Awendaw, Charleston, Daniel Island, Goose Creek, Isle of Palms, James Island, Johns Island, Kiawah, Mount Pleasant, North Charleston, Sullivan’s Island, Summerville, or West Ashley.