Part II: Breaking down post-divorce, child-related tax breaks

On behalf of The Marks Law Firm, L.L.C. posted in Child Custody on Thursday, March 29, 2012

In our previous post, we discussed child custody and child-related tax breaks that noncustodial parents can be entitled to after a divorce.

However, those tax breaks are contingent on the noncustodial parent meeting certain conditions.

In our last post, we mentioned several having to do with support and a divorce or written separation agreement.

In addition to those conditions, the following additional conditions must also be met:

The child must be in the custody of one of the parents, or both of the parents, for more than half of the year.

The custodial parent must put their signature on a document stating that the noncustodial parent has the right to claim the child as a dependent for the year. The custodial parent must sign IRS form 8332, which is also known as the Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent (the IRS always comes up with catchy form names, doesn’t it?).

The noncustodial parent then attaches a copy of the signed form to their 1040.

What happens when all of the conditions are met? It’s then that the noncustodial parent is eligible for the following tax breaks:

Dependency exemption deduction
This exemption allows the noncustodial parent to deduct $3,800 for 2012 and $3,700 for 2011.

Child tax credit
This is worth up to $1,000 (higher income parents might get a reduced credit or not qualify).

Higher education tax credit
This credit can be up to $2,500 during the child’s first four years of college. (Again, higher income parents might get less credit or even be phased out entirely.)

We’ll write some more about post-divorce, child-related tax issues in our next post.

Source: “Child-Related Tax Breaks After Divorce,” Bill Bischoff, March 27, 2012

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