Who Gets to Claim the Children on their Taxes during a Divorce/Dissolution?
This is a common problem among my clients, so I thought it would be appropriate to give a general overview on here.
Taxes can be very complicated. It is hard enough to sort out when a child is a child on line X, but not line Y, and when a qualifying dependent qualifies for the purposes of C, but not D. But who actually gets to claim the children in the first place? Like so many other legal questions, the answer is “It depends, and what it probably depends on is the judge.”
In many if not most cases, ex-spouses simply agree on who gets to claim the children. Parents who retain joint legal custody, especially in situations with 50/50 parenting time arrangements, frequently decide to split each year. This can be done by each taking half (in the case of four children, each spouse claims two), or, more commonly, the parents go year by year (Dad claims the children in year 1, Mom in year 2, etc.). The latter is generally more preferable not only because of the legal absurdity of chopping a child in two in the case of an odd number of children, which you cannot do on Ohio or Federal tax returns, but claiming multiple children frequently qualifies parents for a more favorable tax bracket, such as head of household, or qualifies them for additional exemptions or credits, like the Earned Income Tax Credit (EIC), resulting in a net gain for both parents over two years.
The question gets more difficult when the soon to be ex-spouses do not agree. Even in the most amicable dissolutions, I like to inform my client how a judge would likely rule should an agreement not be made, if only for them to better understand what is fair, or more accurately put, what the Ohio legislature and courts believe is fair.
The Ohio Legislature has given the courts a large amount of deference when it comes to divorce/dissolution agreements. However, in regards to claiming dependents, the code uses the word “shall,” a word fairly obscure in Ohio domestic relations statutes (as opposed to “may”). The codes uses “shall” to dictate that when the parties of a divorce or dissolution agree who ought to claim the children as dependents, as in the court “shall designate that parent as the parent who may claim the children.” [See Ohio Revised Code 3119.82] In cases where the parties do not agree, courts may exercise their discretion in determining who may claim the exemptions.
When an Ohio court rules that the residential custodial parent (in the case that there is only one residential and custodial parent) may claim their children for tax purposes, that is likely the end of the business. No additional analysis by the court is mandated by law, and should the ruling be appealed, the appellate court will review the decision on an abuse of discretion standard (really high standard). The court may however award the exemption to a non-residential and non-custodial parent when it rules to do so would be in the child(ren)’s best interest. Factors the courts are to use in determining what is in child(ren)’s best interest include net tax savings between the parents, the relative financial circumstances and needs of the parents/children, the amount of time the children spend with each parent, the eligibility of either or both parents for the EIC, and any other relevant factor. While statute mandates these factors be considered, how to weigh them lies in the discretion of the trial court.
That is domestic relations tax law in a nutshell. Like any other legal determination, the wisest thing to do is retain an appropriately knowledgeable attorney that knows how local judges weigh and are likely rule on each issue. Additionally, it is important to understand that complicated tax issues must be handled by a tax attorney along with your domestic relations attorney. I just hope this article clarified a few common questions my clients frequently have.