In cases in which divorced or separated parents in California both claim their children as dependents on their federal income tax returns, the Internal Revenue Service will have to determine whose claim will be allowed. If there is no separation, custody or divorce agreement in place that specifies who can claim the children, the IRS will use a series of rules to make a decision.
The relationship between the taxpayer and the dependents is the first factor that is taken into account if there are competing claims. The claims of parents will typically be prioritized over the claims of non-parents.
Where the dependents resided for the longest during the tax year is the next tie-breaker. The IRS will generally approve the claim of the parent with whom the dependents lived for the longest period during the tax year. In cases of divorce, the custodial parent will be able to claim the children. In cases of separation or equal and joint custody, additional rules may have to be applied to render a decision.
If the residency ruling is the same, the IRS will look at the incomes of both parents. Because it is assumed that the higher-earning parent will have provided the most support, the claim of the parent who earned the higher adjusted gross income will be allowed.
A family law attorney may examine the factors of a client’s divorce case, take into account the client’s desired settlement terms and recommend certain legal strategies to pursue. In cases in which clients are parents, the attorney may work to obtain settlement terms that allow the clients to claim their children as dependents on tax returns and claim any related tax credits. The attorney may also help resolve other disputes regarding clients’ children, including those regarding child custody and support.