After divorce, Oklahoma parents might be surprised to learn that their custody arrangement can affect their tax filings. The way custody is awarded, and the agreements made by the parents during their divorce can affect which parent claims their child as a dependent and what types of deductions and tax breaks parents are able to claim.
Custodial parents can take advantage of a variety of tax breaks
If your child lives primarily with you so that you are considered the custodial parent, you might be able to take a variety of tax credits and deductions if you meet the required conditions, which might lead to increased tax returns or lower taxes owed if you claim your child as a dependent. These tax breaks include:
• The child tax credit, which is based on the parent’s income
• The child and dependent care credit, which is meant to help parents cover the costs associated with childcare
• The earned-income tax credit, which is meant to help lower and middle-income families
• Status as head of household on your tax return, which might allow you a higher standard deduction.
Some non-custodial parents might also claim child-related tax benefits
Generally, non-custodial parents are unable to claim the tax credits and other benefits that include the residency of the child as a condition. However, they might be able to claim their child as a dependent so that they can claim the child tax credit, if they are divorced or legally separated from the other parent or have lived in separate homes during the second half of the previous year, one or both parents have custody of the child and pay for at least half of the child’s maintenance and they provide the information required in the 8332 form to the IRS.
You and your child’s other parent might also reach an agreement on who will claim the child each year. This will allow both to access these benefits at different times.