When parents share 50/50 custody, a big question often arises: Who claims a child on taxes with 50/50 custody? The IRS has specific rules to help determine who can claim a child in these cases, even when both parents share equal time with their child. This guide will explain those rules and help you understand how to navigate this situation.

Who Claims a Child on Taxes with 50/50 Custody?

What Does 50/50 Custody Mean for Taxes?

In a 50/50 custody arrangement, the child spends equal time living with both parents. However, when it comes to taxes, only one parent can claim the child as a dependent each year. Even though the custody is equal, the IRS doesn't automatically allow both parents to claim the child.

So, who claims a child on taxes with 50/50 custody? The IRS uses a set of rules to figure that out, and it’s important to know what those rules are.

Who Is the Custodial Parent in 50/50 Custody?

The IRS has a specific definition for the custodial parent. In 50/50 custody situations, the custodial parent is usually the one who has the child for more nights during the year. But what happens when both parents have the child for exactly the same amount of time?

In those cases, the IRS uses tiebreaker rules to decide who the custodial parent is. So, who is the custodial parent in 50/50 custody? Let’s break down how the IRS determines this.

IRS Tiebreaker Rules for 50/50 Custody

In 50/50 custody arrangements, both parents often have an equal share of time with their child. However, for tax purposes, only one parent can claim the child as a dependent in any given year. So, what happens when both parents spend exactly the same number of nights with the child? The IRS has tiebreaker rules to help decide who gets to claim the child. Let’s break down these rules thoroughly and answer common questions that parents might have.

Higher Adjusted Gross Income (AGI):

What is AGI? Adjusted Gross Income (AGI) is your total gross income (such as wages, dividends, and capital gains) minus specific deductions. It’s essentially your income after certain adjustments are made.
How does this rule work? If both parents have the child for the same number of nights, the IRS will allow the parent with the higher AGI to claim the child as a dependent. This rule helps the IRS choose the parent who likely has more financial responsibility.
Why is this important? If your AGI is higher, you might benefit more from tax credits, so the IRS gives preference to the higher earner in tie situations.

Mutual Agreement Between Parents:

What does a mutual agreement mean? Parents can agree between themselves who will claim the child. This agreement does not have to follow IRS tiebreaker rules, but it should be clear and, ideally, in writing.
Why have an agreement in writing? Having a written agreement prevents future conflicts. It also protects both parents if the IRS ever questions the arrangement.
What if we want to alternate years? Parents sometimes decide to alternate years in claiming the child. For example, one parent claims the child in even years, and the other parent claims the child in odd years. This kind of arrangement can work well, as long as both parents agree.

Primary Caregiver:

What if one parent provides more day-to-day care? Even in a 50/50 custody arrangement, one parent might still take on more responsibilities for the child’s daily care, such as taking the child to appointments, helping with homework, or providing more financial support.
How does this factor into the IRS decision? If the higher AGI and mutual agreement do not resolve the issue, the IRS might look at which parent provides more of the child’s daily care. This parent may be considered the custodial parent for tax purposes, even though time with the child is technically equal.
What records should I keep? It’s a good idea to keep detailed records of who handles the child’s day-to-day needs in case the IRS asks for proof. This could include a calendar of school pickups, doctor’s appointments, or financial contributions.

Why Is Claiming a Child Important?

Claiming a child on your taxes can offer several valuable benefits, which is why it’s so important for parents to know who gets the right to claim the child. Here are the main benefits of claiming a child as a dependent:

Child Tax Credit:

What is the Child Tax Credit? This credit allows you to reduce your tax bill by up to $2,000 for each child under 17. If your tax liability is less than $2,000, you may even be eligible to receive part of the credit as a refund.
Why is this credit beneficial? It directly reduces the amount of taxes you owe, which means more money stays in your pocket. If the tax is zero or less, you may receive a refund for part of the credit.

Earned Income Tax Credit (EITC):

What is the EITC? This credit is designed to help low- and moderate-income workers. Depending on your income level, you may qualify for a significant reduction in the taxes you owe, or you could even receive a refund.
How does the EITC work? The credit amount depends on your income and the number of children you can claim. The more qualifying children you have, the larger your credit.
Why is this important? Claiming a child on your taxes can increase your eligibility for the EITC and the amount of the credit. If you qualify, this credit can significantly reduce your tax burden or even result in a refund.

Head of Household Filing Status:

What is Head of Household status? This is a special filing status that applies to unmarried individuals who are financially supporting a child or another dependent. It offers a lower tax rate and a higher standard deduction compared to filing as single.
Why can only one parent claim this? Only the parent who is considered the custodial parent under IRS rules can file as head of household. The other parent will have to file as single, even if they provide significant financial support.
How much can you save? Filing as head of household can result in significant tax savings due to the higher standard deduction. In 2023, for example, the standard deduction for head of household filers was $20,800, compared to $13,850 for single filers.

Childcare Credit:

What is the Childcare Credit? This credit helps offset the cost of childcare for working parents. If you pay for daycare or after-school programs, you may be able to claim part of those expenses on your taxes.
How much can you claim? You can claim up to 35% of qualifying childcare expenses, with a maximum of $3,000 for one child or $6,000 for two or more children.
Why is this credit valuable? Childcare expenses can add up quickly, and this credit helps reduce the financial burden by giving back some of what you spend on care. Only the parent who claims the child as a dependent can claim the childcare credit.

Common Questions About Claiming a Child in 50/50 Custody

Here are a few more questions parents might have when dealing with this situation:

What happens if both parents claim the child? If both parents accidentally claim the child on their tax returns, the IRS will flag the issue and likely contact both parents to resolve the situation. The IRS will apply the tiebreaker rules, usually allowing the parent with the higher AGI to claim the child. The other parent may face penalties or be required to amend their tax return.
Can we switch who claims the child each year? Yes, if both parents agree, they can alternate who claims the child from year to year. This can be a fair solution in cases where both parents share financial responsibility and time equally. However, it’s important to document this agreement in writing to avoid future conflicts.
What if we disagree on who should claim the child? If there’s a disagreement, the IRS will follow its tiebreaker rules. If you believe you have the right to claim the child, you may need to provide documentation, such as records of how much time the child spends with you or proof of financial contributions, to support your case.
Can the non-custodial parent claim the child? In some cases, the custodial parent can sign Form 8332 to allow the non-custodial parent to claim the child for a particular year. However, once this form is signed, the custodial parent cannot claim the child for that tax year.

Using Form 8332 to Transfer Claim Rights

In some cases, parents may decide to let the non-custodial parent claim the child for a given year. To make this official, the custodial parent must fill out Form 8332: Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. This allows the non-custodial parent to claim the child on their taxes.

However, once Form 8332 is signed and submitted, the custodial parent cannot claim the child for that year. This makes it essential for parents to have clear communication and agreements about who will claim the child.

Common Misunderstandings About 50/50 Custody and Taxes

When it comes to 50/50 custody, there are several misunderstandings about who can claim a child on their taxes. These misconceptions can lead to confusion and even penalties from the IRS if not addressed properly. Let’s break down these common misunderstandings in detail and clarify what the actual rules are.

Misunderstanding 1: Both Parents Can Claim the Child

The Misconception: Many parents believe that if they share 50/50 custody, both of them can claim the child as a dependent on their tax returns. Since both parents are equally involved in the child’s life, they assume this means equal tax benefits.

The Truth: The IRS only allows one parent to claim the child as a dependent each year. It doesn't matter if custody is shared equally; only one parent can claim the child. Trying to claim the child on both returns can lead to serious consequences.

What Happens if Both Parents Claim the Child?:

The IRS will flag both returns.
They will reach out to both parents for additional information.
The IRS applies the tiebreaker rules (such as who has the higher income or who had the child for more nights) to decide which parent can claim the child.
In some cases, penalties could be imposed, or one of the returns could be rejected, delaying any potential refund.

How to Avoid This Issue:

Make a clear agreement in advance about who will claim the child.
File Form 8332 if the custodial parent is allowing the non-custodial parent to claim the child. This ensures there’s no confusion when both returns are processed.

Misunderstanding 2: The Parent Who Pays More Gets to Claim the Child

The Misconception: Some parents think that the one who spends more money on the child’s care—whether for clothes, school fees, or medical bills—should get the right to claim the child as a dependent.

The Truth: The IRS doesn’t take into account how much money each parent spends. The main factors are:

Time spent with the child: The parent who has the child for more nights during the year is usually considered the custodial parent.
Adjusted Gross Income (AGI): If the parents share exactly equal time with the child, the parent with the higher AGI typically gets to claim the child.

Key Takeaway: Financial contributions to the child’s care are not relevant when it comes to tax claims. The time the child spends with each parent is what matters most.

Misunderstanding 3: Parents Must Alternate Years

The Misconception: It’s often assumed that in joint custody situations, parents are required to alternate years when claiming the child as a dependent on their taxes.

The Truth: There is no IRS rule that says parents must take turns claiming the child. Parents can agree on whichever arrangement works best for them, as long as it follows IRS guidelines and only one parent claims the child each year.

Possible Agreements:

Alternating years: Some parents do choose to take turns claiming the child to share the tax benefits.
One parent claims every year: In other cases, one parent may consistently claim the child if it makes the most sense for them financially.

Important Tip: Whatever arrangement is made, it’s best to put it in writing to prevent future disagreements.

What Happens if Both Parents Claim the Child?

Sometimes, despite the best intentions, both parents might end up claiming the child in the same year. This can happen accidentally, or perhaps the agreement between the parents wasn’t clear enough.

Here’s what to expect if both parents claim the child:

IRS Review: The IRS will catch the mistake when processing the returns. Both parents will be notified that there’s an issue.
Request for More Information: The IRS will request additional documentation to figure out who should be allowed to claim the child. This is where keeping accurate records of overnights with the child becomes crucial.
Application of Tiebreaker Rules: If both parents had the child for an equal number of nights, the IRS will use the tiebreaker rules to decide who can claim the child. These include:

Who has the higher adjusted gross income (AGI)?
Any written agreements between the parents.

Penalties and Delays: One parent will likely have their return rejected or delayed. In some cases, penalties could be imposed if the error is repeated or seen as intentional.

How to Avoid This Situation:

Clear communication: Discuss and agree on who will claim the child before tax season.
Use Form 8332: If the custodial parent is allowing the non-custodial parent to claim the child, this form ensures the IRS recognizes the agreement.

Best Practices for Parents with 50/50 Custody

To avoid tax issues and keep everything running smoothly, it’s a good idea to follow these best practices:

1. Agree in Writing

Both parents should agree—ideally in writing—about who will claim the child on their taxes each year. A written agreement helps prevent any confusion and gives you a document to reference if issues arise. If you don’t have an agreement, discuss this with the other parent well before tax season.

2. Talk Early

Don’t wait until you’re ready to file your taxes to figure out who will claim the child. Discuss tax-related issues early, so you both know the plan and avoid mistakes that could lead to delays or penalties.

3. Keep Accurate Records

Accurately documenting how many nights the child spends with each parent can help if the IRS ever questions who the custodial parent is. Even in a 50/50 custody arrangement, it’s helpful to know if one parent had the child for an extra night or two, as this could affect who is eligible to claim the child.

4. Consult a Family Lawyer

If you’re unsure about your situation or want to make sure you’re handling everything correctly, consult a family lawyer. They can help you understand your rights and responsibilities and ensure your agreements are legally sound.

Conclusion

In a 50/50 custody situation, only one parent can claim the child on their taxes. The IRS uses rules like custodial status and income to decide who can claim the child. To avoid disputes and make sure your taxes are filed correctly, it's best to reach an agreement and keep clear records.

Krasner Law is here to assist if you're dealing with child custody. Contact us today for more information on how we can support your family law needs.