Dependents and Exemptions

Divorce and College can Present Questions

Although children can be expensive, they can be valuable at tax time. The government allows you to claim an exemption amount for each dependent on your return. Each exemption allows you to reduce the amount of income on which you pay tax—by $3,650 per exemption in 2009 and 2010.

Deciding who can claim a dependent can be confusing. A common question of divorced or separated parents is whether the dependency can be “split”. For example, each parent may want to claim the child for half of the year.  Parents of college students also have questions. A common uncertainty of parents of a graduating college is they can claim the child for the half a year he or she was a student.

The short answer is that the dependency exemptions CAN NEVER be split.  However, the details are a little more complicated.

In a divorce, the child is generally treated as the dependent of the custodial parent.  The custodial parent is the parent who physically has the child for the majority of days in the year.  The child's address of record for school, doctors, and so on is the address of the custodial parent.

However, the custodial parent can agree to “give” the exemption to the non-custodial parent. (This may be covered by the divorce agreement; for example, the agreement could state that the exemption goes to one parent in odd numbered years and the other in even numbered years.) Regardless of whether the divorce decree addresses dependency, the custodial parent must explicitly authorize the non-custodial parent to claim the child's exemption by completing an IRS Form 8332. The form can release the exemption for the current year, for specified years, or for all future years.  The non-custodial parent must attach a copy of the form to his or her tax return.

When your children are in college, they are your dependents if they are under 24 years old at the end of the year and full-time students for some part of at least 5 calendar months of the year.  Once the child turns 24, then the amount of his or her earnings determines who can claim the exemption.

Sometimes parents want to let their child claim their own exemption on their personal tax return as part of “growing up.” Unfortunately, the law does not allow this. If your child qualifies as your dependent, he or she CANNOT claim his or her own personal exemption.  (In some circumstances, it may be advantageous for the parents to elect not to claim the dependant so that the student may claim a college credit. Even in such a case where the parents choose not to claim the child, the child still is not entitled to take a personal exemption on their own return.)

If you have any questions about children or dependency, please feel free to contact one of our tax professionals.  We will be happy to address specific questions about your particular situation.

(June 14, 2010)

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