Another Tax Tip

When two separate, determining which parent is going to take the children as exemptions, look to the custody agreement/order first. The parent with greater than 50% custody is entitled to take the exemption. The parents that are on a true shared schedule, on alternating weeks for example, then the parents can each take one of the children (for 2 children) in the same year or alternate each year (e.g. for 1 or 3 children).

It only makes sense to release the exemption to the lower timeshare parent if it maximizes the collective tax benefit. This is because once an exemption is released, the child support under California law should be recalculated upward  to reflect the tax benefit the lower timeshare parent is receiving.  The Court may order the exemption to be released in limited situations. Because of the progressivity of the federal income tax, "the higher a taxpayer's income, the more valuable exemptions become .... As a result, the effect of awarding the exemption to the noncustodial parent is to increase the after-tax spendable income of the family as a whole, which may then be channeled into child support. ...” [Monterey County v. Cornejo (1991) 53 C3d 1271, 1280, 283 CR 405, 411]

When the exemption is released, it is important the child support order also clarifies that the release be conditioned on being current on support for that tax year. The noncustodial parent will want to have a condition that the custodial parent will cooperate in signing the IRS 8332 form required when the tax returns are filed with the exemptions that are taken.

Article Submitted By: Attorney Daniel Gold