If you are getting divorced and have a child or children together, you and your spouse will be asked to decide who gets to take the child(ren) as a qualifying child. This will enable you or your spouse or both of you (if there are multiple dependent children) to file as Head of Household rather than Single or Married filing separately if you are not technically divorced yet. This can be a complicated decision and you should consult with a local tax professional in your specific geographical area. That being said, here is a high-level overview of why this decision is important and specific considerations for divorcing couples.
Why is filing as Head of Household more advantageous than filing as a Single person or even Married filing separately?
- The taxpayer can claim the standard deduction even if his or her spouse files a separate return and itemizes deductions.
- The taxpayer’s standard deduction is higher than is allowed if the taxpayer claims a filing status of single or married.
- The taxpayer’s tax rate will usually be lower than it is if they claim a filing status of single or married filing separately.
- The taxpayer may be able to claim certain credits (such as dependent care credit and earned income credit) that they cannot claim with a filing status of married filing separately.
- Income limits that reduce an individual’s child tax credit, retirement savings contributions credit, and itemized deductions are higher than the income limits if the taxpayer claims a filing status of married filing separately.
What are the requirements for filing as Head of Household?
- They are unmarried or “considered unmarried” on the last day of the year;
- They paid more than half of the cost of keeping up a home for the year; and
- A “qualifying person” lived with them for more than half of the year (except for temporary absences, such as school). If the “qualifying person” is the individual’s dependent parent then they do not have to live with the individual.
Can a child who lives less than half the year qualify as a “qualifying child” of the noncustodial parent?
As noted above, because of the residency test a child of divorced or separated parents is the “qualifying child” of the majority physical custodial parent because they would be with them more than half the year. If the child custody is 50/50 the custodial parent is the parent with the higher adjusted gross income. There are special rules for divorced or separated parents. If all of the following applies the child can be treated as the “qualifying child” of the noncustodial parent:
- The parents:
- Are divorced or legally separated under a decree of divorce or separate maintenance;
- Are separated under a written separation agreement; or
- Lived apart at all times during the last six months of the year, whether or not they are or were married.
- The child received over half of their support for the year from the parents;
- The child is in the custody of one or both parents for more than half the year;
- The custodial parent signs a written declaration, that they will not claim the child as a dependent for the year and the noncustodial parent attaches this written declaration to their return. This is typically done on Form 8332.
Disclaimer: While the information provided hereby Splitfyi, Inc. is financial in nature this should not be construed or relied upon as legal or tax advice. Individuals seeking legal or tax advice should solicit the counsel of competent legal or tax professionals knowledgeable about the divorce laws in their own geographical areas.
