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How does child custody affect my tax returns?

When you and your child's other parent decide to separate or divorce, you face numerous decisions about how you will share the responsibilities and privileges of parenthood. For many parents, negotiating these arrangements is complicated and frustrating. Unfortunately, the emotional weight of dividing up parenting responsibilities often causes some parents to overlook important aspects of these agreements, leaving them unprepared for unpleasant surprises later on.

One of the most commonly overlooked aspects of child custody and parenting plans is the affect that child custody arrangements have on parents' tax returns. Of course, tax laws change regularly, so it is always wise to consult with a tax preparation professional to make sure that you understand the most up-to-date changes.

If you and your child's other parent cannot agree on how to raise your child separately, or if you are on the same page and simply need some guidance to ensure that you don't overlook something important, be sure to speak with an experienced family law attorney. An attorney can guide you through each aspect of these agreements and make sure that you have the tools you need to provide the best life you can for your child.

Who claims the child as a dependent?

Depending on how two parents choose to divide up custody, it may make sense for only one parent to claim the child as a dependent on tax returns. This is common in circumstances where one parent retains primary custody of the child, leaving little doubt as to which parent should appropriately claim the dependent tax benefits.

Many parents, however, run into difficulty if they do not clearly determine who claims these tax benefits ahead of time. While dependent tax benefits can make a huge difference come tax season, they are only available to one parent of one child at a time.

Practically speaking, if you and your child's other parent share roughly equal parenting time and responsibilities, then you may both reasonably claim these benefits as your own. However, the Internal Revenue Service does not allow both parents to claim the same child on their tax returns in a given year. If both parents claim the child on the same year's tax returns, the IRS may simply remove the benefits from one return, making for a nasty and possibly expensive surprise for the parent who does not get to keep the benefits.

Many parents simply choose to alternate years claiming child dependent benefits, keeping things simple for both parties. If you choose to use this method with your child's other parent, be sure to get this agreement in writing and that both of you understand exactly what your agreement means.

Don't negotiate alone

The agreements you reach with your child's other parent lay out the ground work you can use to give the child you both love the best life you can. It is important to remember that these agreements are legally binding and carry serious financial implications, so you may want to enlist the guidance of an experienced family law attorney to help you negotiate truly fair terms and protect your rights as a parent.

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