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Who Gets the Tax Exemption for The Kids?

Sometimes, one of the biggest points of contention in a divorce is something the state court has no real power to decide. That's the right to claim the federal income tax exemption for the children. The basic rule is that whichever parent has primary custody of the children gets to claim use the tax exemption. When the parents are designated as Joint Managing Conservators, they sometimes want to argue over the right to claim the exemption.

The Dallas Divorce Law Blog by the May Firm had an excellent, brief post that discussed the issue that came up in a recent Dallas Court of Appeals case. The Court again made clear the following points:

  • state courts have no authority to rule on federal tax matters,

  • the parent with primary custody gets the exemption, and

  • primary custody may be determined by figuring out which parent has more time with the children.

Figuring out who has the kids more can be pretty tricky sometimes, depending on what the possession schedule is. Now, there are a lot of different kinds of schedules. If both parents have the kids for alternate weeks, they could have very nearly equal time. The only difference might come in the holidays. Other schedules appear to have equal time sharing and present a similar problem.

What can be done?

  • You can go through the schedule and count the days or hours to determine the “winner”.

  • You could agree to alternate years with the exemption.

  • If there are several kids, you can split the exemptions between the parents.

  • If there is a disparity of income, you could get someone to calculate the actual impact of the use of the exemptions for both parties and then make a rational agreement to maximize the benefit.

  • One parent could pay a sum to the other parent for the right to take the exemption.

  • You could both claim the exemptions and then sort it out with the IRS when they catch it — THAT's the worst idea. Don't let it go that far. It's not worth it!

There are undoubtedly other solutions. The key to remember is to reach an agreement. Use your best judgment and reach some compromise agreement. It will save everyone money in the long run.