California parents who are divorced or separated may want to take advantage of the tax benefits that come with claiming their children as dependents on tax returns. However, they should be aware that if multiple taxpayers claim the same individual as a dependent, complications are likely to arise.
Taxpayers who are able to claim dependents can benefit from filing as the head of their household. They may also claim certain tax credits, such as the Child and Dependent Care Tax Credit, the Earned Income Tax Credit and the Child Tax Credit.
With the passage of the Tax Cuts and Jobs Act, a number of tax law changes were instituted. Beginning with the 2018 tax year, the personal exemption is no longer used. However, the Dependent Care Credit was allowed to remain, and the Child Tax Credit was doubled to $2,000.
If more than one taxpayer claims the same child as a dependent and there are no legal agreements, such as divorce, custody or separation agreements, that address who can claim the tax credits, the Internal Revenue Services will use a series of rules to figure out which claim should be accepted and which claim should be rejected. The rules address multiple factors that should be considered.
The relationship between the taxpayer and the dependent is the first factor that is considered; parents who claim their children will be prioritized over any non-parents who claim the same children. Also, the parents whose residence the children lived in for the longest period may be allowed to claim them as dependents.
A family law attorney may assist clients with resolving disputes regarding divorce legal issues. Negotiation or litigation may be used to address issues such as child custody. The attorney may work to obtain settlement terms that allow clients to claim their children as dependents on tax returns.