Divorces cause tax issues, including which parent is allowed to claim valuable child-related tax breaks. Sometimes, but not always, it depends on which parent is allowed to claim the child as a dependent.Here are some important considerations:
- The general rule says that only the custodial parent can claim the dependent exemption deduction for the child.
- However an exception allows the custodial parent to give the noncustodial parent the right to claim the designated child as a dependent.
- Under the noncustodial parent rule, the designated child is treated as a qualifying child of the noncustodial parent if certain requirements are met.
Child Related Tax Breaks Available to Noncustodial Parent (if certain requirements are met):
- Dependency Exemption Deduction: This deduction is $3,800 for 2012; $3,700 for 2011.
- Child Tax Credit: This credit is worth up to $1,000 for each eligible child.
- Higher Education Tax Credits: The American Opportunity credit can be worth up to $2,500 during the first four years of a child’s college education. The Lifetime Learning credit can be worth up to $2,000.
- Student Loan Interest Deduction: This deduction can be for up to $2,500 of qualified student loan interest expense paid by the parent .
- Tuition Deduction: This deduction can be as much as $4,000 for higher education tuition and mandatory enrollment fees.
For information about tax breaks available to both parents and those only allowed to the custodial parent and for full article see: Child-Related Tax Breaks After Divorce – SmartMoney.com.
- Remarriage with Children? Income Tax Considerations (divacfo.com)