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Tax implications of divorce with children

Many Florida residents who have divorced over the past year should be aware that there are special considerations that should be taken into account when the filer is divorced and especially so when there are children in the picture.

One of the more important considerations is the dependency exemption. If a parent is awarded child custody, then they are eligible to claim a dependent exemption in the amount of $3,950 for each child in their custody. Also it is important to note that the child tax credit and the exemption for dependents can be claimed by the noncustodial parent as well, but only if the custodial parent consents to such a thing. Proof of consent by the custodial parent needs to be validated by having them sign a certain Internal Revenue Service form. After that, the noncustodial parent will need to file a form with their annual income taxes for the same year that they will be claiming the dependency exemption.

Keep in mind that even in the event that a noncustodial parent claims the dependency exemption, the parent with custody is still able to file as Head of Household, which will lower their tax liability. Additionally, the custodial parent may still be eligible to qualify for the Child Care Benefits exclusion, the Child Care Credit and the Earned Income Credit.

In the event that a parent either erroneously or unscrupulously claims the dependency when they are not entitled to it, resolving the error in the eligible parents favor can be a chore. The eligible parent will have to send proof of custody such as a certified copy of Marital Separation Agreement that lists them as the custodial parent.

Sometimes an MSA doesn't exist, in which case the custodial parent must submit proof of residency and of having provided over 50 percent of child support for each child they wish to claim as an exemption on their annual tax forms. A tax return that is filed electronically will be rejected if the dependency exemption is claimed when the same exemption is also claimed by the other parent.

Source: FOX Business, "Taxes and Divorce, What You Need to Know," Bonnie Lee, Dec. 1, 2014

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