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Child custody and tax credits after divorce explained!

Texas parents might be interested in a report on how to determine child tax breaks during or after a divorce. When parents get divorced one of the most highly contested aspects involves negotiating custody of the children. A divorce can create a variety of tax questions and one of the big ones is who gets the tax breaks and claims the child as a dependent on their tax returns. When it comes to taxes, a child is considered belonging to one parent or the other. Usually the parent who has physical custody the greater part of the year is considered the custodial parent.

Generally the rules state that only the custodial parent can claim the dependent and take the tax deduction for the child, however there are exceptions where a custodial parent can allow the non-custodial parent to claim the child as a dependent and take the tax deduction on his or her return.

In order to file as a non-custodial parent with a qualifying child certain requirements must be met. Parents must have lived apart for the last six months of the year or been divorced or separated under a written agreement at the end of the year. One or both parents must have contributed more than half of the child's support for the year, and the child must be in the custody of one or both parents for more than half the year.

For the non-custodial parent to be able to claim the tax deduction he or she must also have a written declaration from the custodial parent releasing his or her right to claim the child as a dependent for that year. Specific IRS forms are required and must be attached to tax return forms as well.

There are numerous tax breaks beyond the dependent-exemption deduction, such as child tax credit, and itemized deductions such as medical and educational expenses that can be split between both parents or claimed by either parent. However some tax breaks can only be claimed by the custodial parent, including the earned income tax credit and head of household filing status.

If you are considering a divorce or separation it is important to understand your parental rights and protect those rights before an agreement is reached. Generally an agreement cannot be modified without a significant change in circumstances, such as loss of a job or income. An experienced divorce and child custody attorney can help you determine child custody and support agreements that work for your specific situation, as well as protect the best interests of your children.

Source: The Wall Street Journal, "Who Gets the Child Tax Breaks After a Divorce," Bill Bischoff, March 31, 2012

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