My son is going through a divorce, and he and his wife have one minor child. The lawyers are telling them that because they live in a 50-50 custody
state, the normal approach when you have one child is for the decree to
specify that the couple alternate years in which they claim the tax credits
for the child. So, as an example, Parent 1 is allowed to claim the child in odd-numbered years and Parent 2 claims the child in even-numbered years.
In essence, if is the parent’s “year”, they file as Unmarried Head of Household and take all child-related credits allowed and the other parent
files as “Single” and gets no child related benefits.

I am wondering what the IRS thinks of all this and does this ever cause a problem for the divorced parties? Technically, my understanding is the IRS does not allow certain benefits unless you have custody of the child for
more than half the year, but under 50-50 custody, the idea is that each
parent gets the child exactly half the time. Now because most years have an odd number of days, it is likely one parent will have the child more days
than the other just because of the way the calendar works out, but this won’t necessarily coincide with the odd year-even year provision in the decree.
And because it is spelled out in the decree, most parents in this situation won’t even bother to keep track of the exact number of days. And that doesn't even address the fact that if it is a leap year, it is quite
possible for the parties to have true 50-50 custody.

Is this really as simple and straightforward as it sounds? 50-50 custody
has been around for a few years in many states, so I'm sure the tax pros
here are familiar with it and with the idea of the alternating years. And
is it as simple as saying the person whose year it is gets ALL child-related benefits and the other person does not?

Thanks in advance!

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"Aaron" <[email protected]> wrote:

My son is going through a divorce, and he and his wife have one minor child. >The lawyers are telling them that because they live in a 50-50 custody
state, the normal approach when you have one child is for the decree to >specify that the couple alternate years in which they claim the tax credits >for the child. So, as an example, Parent 1 is allowed to claim the child in >odd-numbered years and Parent 2 claims the child in even-numbered years.
In essence, if is the parent�s �year�, they file as Unmarried Head of >Household and take all child-related credits allowed and the other parent >files as �Single� and gets no child related benefits.

I am wondering what the IRS thinks of all this and does this ever cause a >problem for the divorced parties? Technically, my understanding is the IRS >does not allow certain benefits unless you have custody of the child for
more than half the year, but under 50-50 custody, the idea is that each >parent gets the child exactly half the time. Now because most years have an >odd number of days, it is likely one parent will have the child more days >than the other just because of the way the calendar works out, but this won�t >necessarily coincide with the odd year-even year provision in the decree.
And because it is spelled out in the decree, most parents in this situation >won�t even bother to keep track of the exact number of days. And that >doesn't even address the fact that if it is a leap year, it is quite
possible for the parties to have true 50-50 custody.

Is this really as simple and straightforward as it sounds? 50-50 custody
has been around for a few years in many states, so I'm sure the tax pros
here are familiar with it and with the idea of the alternating years. And
is it as simple as saying the person whose year it is gets ALL child-related >benefits and the other person does not?

The IRS is not bound by what the divorce decree says.
Federal tax law does not recognize 50-50 custody. For any
given year, one parent is the custodial parent and the other
parent is the noncustodial parent. IRS Publication 501 says
the following.

"The custodial parent is the parent with whom the child
lived for the greater number of nights during the year. The
other parent is the noncustodial parent. . . . If the child
lived with each parent for an equal number of nights during
the year, the custodial parent is the parent with the higher
AGI."

If the divorce agreement requires the noncustodial parent to
claim the child as a dependent in some years, the custodial
parent must sign a Form 8332 allowing the noncustodial
parent to claim the child, and give the signed Form 8332 to
the noncustodial parent. The noncustodial parent has to
attach the signed Form 8332 to his or her tax return. The
divorce decree should require the custodial parent to
provide whatever documents are needed to allow the
noncustodial parent to claim the child in the agreed-upon
years.

In a year that the custodial parent claims the child as a
dependent, that parent can claim all the tax benefits
related to the child, and the noncustodial parent cannot
claim any of those benefits.

In a year that the noncustodial parent claims the child as a
dependent, federal tax law specifies how the tax benefits of
having a child are divided up. The noncustodial parent can
claim the child tax credit for the child, and any education
credits. But the custodial parent can still claim the child
care credit and use the child for the Earned Income Credit
and to qualify for head of household filing status, provided
that the other requirements for those tax benefits are met.
Only the custodial parent can use the child for those
benefits. The noncustodial parent cannot claim them.

I recommend that your son have a tax professional review the
divorce decree before it is finalized or signed. Divorce
lawyers (and judges) often don't know as much about tax law
as they think they do, and can put things in the decree that
conflict with federal tax law and cause problems for the
divorced parents.

Bob Sandler

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On Mon, 11 Sep 2023 16:52:32 EDT, Aaron wrote:

My son is going through a divorce, and he and his wife have one minor child. The lawyers are telling them that because they live in a 50-50 custody
state, the normal approach when you have one child is for the decree to specify that the couple alternate years in which they claim the tax credits for the child. So, as an example, Parent 1 is allowed to claim the child in odd-numbered years and Parent 2 claims the child in even-numbered years.
In essence, if is the parent?s ?year?, they file as Unmarried Head of Household and take all child-related credits allowed and the other parent files as ?Single? and gets no child related benefits.

I am wondering what the IRS thinks of all this and does this ever cause a problem for the divorced parties? Technically, my understanding is the IRS does not allow certain benefits unless you have custody of the child for
more than half the year, but under 50-50 custody, the idea is that each parent gets the child exactly half the time.

First, there's an assumption that every year is the same length. We
all know that's not true, but this is a de minimus hack to simplify
accounting.

Second, and more important, each parent does not get custody (for tax
purposes) for half of each year. Each parent gets custody (for tax
purposes) for an entire year, then no custody the entire year after
that. So the tests for "more than half the year" will include the
parent whose year it is.

The IRS gives deference to the terms of divorce decrees, as far as
I'm aware. If the judge awards tax benefits to each parent in
alternate years, I don't see the IRS having a problem with that.

Is this really as simple and straightforward as it sounds? 50-50 custody
has been around for a few years in many states,

Exactly. If the IRS had a problem with these arrangements, there
would have been widespread publicity and divorce lawyers would have
had to come up with some other scheme.

so I'm sure the tax pros
here are familiar with it and with the idea of the alternating years. And
is it as simple as saying the person whose year it is gets ALL child-related benefits and the other person does not?

Sure looks that way to me. See page 13 and following of Publication
501, <https://www.irs.gov/pub/irs-pdf/p501.pdf>.

Note: I am not a tax professional; I just read this group, IRS
publications, and general news. Don't rely on what I say, but check
it out yourself.

--
Stan Brown, Tehachapi, California, USA https://BrownMath.com/
Shikata ga nai...

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And is it as simple as saying the person whose year it is gets
ALL child-related benefits and the other person does not?

No, it's not that simple. If the person whose year it is is
the custodial parent, then yes, that person gets all the
child-related benefits and the other person, the
noncustodial parent, gets none. But if the person whose year
it is is the noncustodial parent, then the benefits are
split between the two parents, as I described in my earlier
reply. In that year, the noncustodial parent gets only some
of the benefits. The custodial parent still gets some of the
benefits, even though the custodial parent is not claiming
the child as a dependent.

Publication 501, page 17, says the following.

"If a child is treated as the qualifying child of the
noncustodial parent under the rules described earlier for
children of divorced or separated parents (or parents who
live apart), only the noncustodial parent can claim the
child as a dependent and claim the child tax credit,
additional child tax credit, or credit for other dependents
for the child. However, only the custodial parent can claim
the credit for child and dependent care expenses or the
exclusion for dependent care benefits for the child. Also,
generally, the noncustodial parent can't claim the child as
a qualifying child for head of household filing status or
the earned income credit. Instead, generally, the custodial
parent, if eligible, or other eligible person can claim the
child as a qualifying child for those two benefits."

Bob Sandler

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On Monday, September 11, 2023 at 8:00:59 PM UTC-4, Bob Sandler wrote:

And is it as simple as saying the person whose year it is gets
ALL child-related benefits and the other person does not?

No, it's not that simple. If the person whose year it is is
the custodial parent, then yes, that person gets all the
child-related benefits and the other person, the
noncustodial parent, gets none. But if the person whose year
it is is the noncustodial parent, then the benefits are
split between the two parents, as I described in my earlier
reply. In that year, the noncustodial parent gets only some
of the benefits. The custodial parent still gets some of the
benefits, even though the custodial parent is not claiming
the child as a dependent.

Publication 501, page 17, says the following.

"If a child is treated as the qualifying child of the
noncustodial parent under the rules described earlier for
children of divorced or separated parents (or parents who
live apart), only the noncustodial parent can claim the
child as a dependent and claim the child tax credit,
additional child tax credit, or credit for other dependents
for the child. However, only the custodial parent can claim
the credit for child and dependent care expenses or the
exclusion for dependent care benefits for the child. Also,
generally, the noncustodial parent can't claim the child as
a qualifying child for head of household filing status or
the earned income credit. Instead, generally, the custodial
parent, if eligible, or other eligible person can claim the
child as a qualifying child for those two benefits."

Bob Sandler
--

I agree with Bob.

Ira Smilovitz, EA
Leonia, NJ

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The real question for me is why doesn't IRS solve this by allowing for >half-exemptions and half-credits for situations where there is true 50-50 >custody? It's all just math, and it would seem the IRS could implement
this with a few software changes.

The IRS doesn't make the rules. Congress makes the rules.
The IRS has to follow the laws that Congress passes.
Changing the rules would require "an act of Congress."

Bob Sandler

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"ira smilovitz" wrote in message news:[email protected]...

On Monday, September 11, 2023 at 8:00:59 PM UTC-4, Bob Sandler wrote:

And is it as simple as saying the person whose year it is gets
ALL child-related benefits and the other person does not?

No, it's not that simple. If the person whose year it is is
the custodial parent, then yes, that person gets all the
child-related benefits and the other person, the
noncustodial parent, gets none. But if the person whose year
it is is the noncustodial parent, then the benefits are
split between the two parents, as I described in my earlier
reply. In that year, the noncustodial parent gets only some
of the benefits. The custodial parent still gets some of the
benefits, even though the custodial parent is not claiming
the child as a dependent.

Publication 501, page 17, says the following.

"If a child is treated as the qualifying child of the
noncustodial parent under the rules described earlier for
children of divorced or separated parents (or parents who
live apart), only the noncustodial parent can claim the
child as a dependent and claim the child tax credit,
additional child tax credit, or credit for other dependents
for the child. However, only the custodial parent can claim
the credit for child and dependent care expenses or the
exclusion for dependent care benefits for the child. Also,
generally, the noncustodial parent can't claim the child as
a qualifying child for head of household filing status or
the earned income credit. Instead, generally, the custodial
parent, if eligible, or other eligible person can claim the
child as a qualifying child for those two benefits."

Bob Sandler
--

I agree with Bob.

Ira Smilovitz, EA
Leonia, NJ

I think Ira and Bob are probably correct going by a strict reading of the
IRS regs. But I also think Stan is right that the IRS isn't likely to step
in when the parties to a divorce agree to this kind of 50-50, alternating
years setup, which I think is pretty common in states like mine (Florida).
I know some couples who have this 50-50 arrangement written into their court approved divorce agreements, and I think they like the predictability of it
and not having to track the total number of hours/days they have the kid.
Seems to me that having to actually track the amount of time each party has
the kid is fraught with problems - such as, what happens if each party calculates differently, and each thinks they are the custodial parent for
the year. Divorced parents often prefer to avoid communicating or even
seeing one another, and the last thing many such couples are going to want
to do is get together to compare calendars and records of who had the kid on what days. And suppose they can't agree? Does the IRS actually expect them
to go back into mediation or get a third party auditor to figure out who
gets to be custodial parent for the year? And the notion that after going through all this, one parent is going to gracefully fill out a form 8332 for the other is kind of ludicrous. Most divorce couples I know do everything they can to avoid talking to one another. I think the 50-50 alternating
year scheme is probably acceptable to most divorced parents with true split custody, and I can't imagine any couple in that situation doing things differently.

So I agree with Stan that the IRS probably winks at all this and doesn't
make a big deal if the couple go along with it. The real question for me is why doesn't IRS solve this by allowing for half-exemptions and half-credits
for situations where there is true 50-50 custody? It's all just math, and
it would seem the IRS could implement this with a few software changes. As
it is, there are probably numerous couples in states like Florida where
50-50 custody is written in divorce decrees that are technically violating
IRS rules, and surely the IRS must know that.

--

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On Tuesday, September 12, 2023 at 12:14:18 PM UTC-4, Bob Sandler wrote:

The real question for me is why doesn't IRS solve this by allowing for >half-exemptions and half-credits for situations where there is true 50-50 >custody? It's all just math, and it would seem the IRS could implement
this with a few software changes.

The IRS doesn't make the rules. Congress makes the rules.
The IRS has to follow the laws that Congress passes.
Changing the rules would require "an act of Congress."

Bob Sandler
--

Adding to Bob's response... And Congress doesn't have to act to accommodate state actions (the 50/50 divorce decree).

Ira Smilovitz, EA
Leonia, NJ

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ira smilovitz <[email protected]> wrote:

Bob Sandler wrote:

The real question for me is why doesn't IRS solve this by
allowing for half-exemptions and half-credits for situations
where there is true 50-50 custody? It's all just math, and it
would seem the IRS could implement this with a few software
changes.

The IRS doesn't make the rules. Congress makes the rules.
The IRS has to follow the laws that Congress passes.
Changing the rules would require "an act of Congress."

Adding to Bob's response... And Congress doesn't have to act to
accommodate state actions (the 50/50 divorce decree).

And if they did, they'd likely have to come up with a whole new set of
tax brackets for people who could claim half a person as a dependent.


--
Stu
http://DownToEarthLawyer.com

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"Bob Sandler" wrote in message news:[email protected]...

The real question for me is why doesn't IRS solve this by allowing for >>half-exemptions and half-credits for situations where there is true 50-50 >>custody? It's all just math, and it would seem the IRS could implement >>this with a few software changes.

The IRS doesn't make the rules. Congress makes the rules.
The IRS has to follow the laws that Congress passes.
Changing the rules would require "an act of Congress."

Bob Sandler

Bob, you are of course right. It's Congress who would have to make this change. But I still think it would be a good move.

--

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"Stuart O. Bronstein" wrote in message news:[email protected]...

ira smilovitz <[email protected]> wrote:

Bob Sandler wrote:

The real question for me is why doesn't IRS solve this by
allowing for half-exemptions and half-credits for situations
where there is true 50-50 custody? It's all just math, and it
would seem the IRS could implement this with a few software
changes.

The IRS doesn't make the rules. Congress makes the rules.
The IRS has to follow the laws that Congress passes.
Changing the rules would require "an act of Congress."

Adding to Bob's response... And Congress doesn't have to act to
accommodate state actions (the 50/50 divorce decree).

And if they did, they'd likely have to come up with a whole new set of
tax brackets for people who could claim half a person as a dependent.

I agree with Irv that Congress doesn't have to act, but they probably
should. More and more states are going to 50-50 custody, including a few
large states like Florida and NJ. According to this site, it looks like around 20 states are now defaulting to this.

https://www.custodyxchange.com/topics/research/dads-custody-time-2018.php

I think it's only a matter of time before this issue becomes visible enough
for Congress to do something to modify the IRS regs. It's becoming clear to
me from this thread and my own observations, that numerous divorced couples
are embracing the simplicity of the alternating years concept and are unknowingly (and maybe, in some cases, knowingly) violating the specific
letter of the IRS regs by ignoring the technical definition of custodial parent.

And yes, Congress might have to create new half-brackets to accommodate half-exemptions, but it's all just math and can be accommodated through software. I think they made much more radical changes when they eliminated explicit exemptions and folded them into the brackets. More importantly,
the idea of half exemptions is just a suggestion. An easier approach (at
least in the short-term), is to just allow for couples with a court-ordered alternating-years decree to do what they've been doing and essentially make
it legal.




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