If you are divorced and have children, only one parent can claim the dependency exemption worth $3,300 each qualifying child on 2006 tax returns. The parent who claims the dependency exemption is also entitled to the $1,000-per-child tax credit for kids under 17, assuming your income is not too high. (You lose some or all of the credit if you file a married filing separately return and your income exceeds $55,000 or claim head of household status and your income tops $75,000.)
Normally, who gets to claim a child as a dependent is a pretty straight-forward decision. Either your divorce decree names the custodial parent. If your divorce documents are silent on the issue, then it's a simply matter of time: You are considered the custodial parent if you child lived with you for a longer period during the year than with your ex.
It's even possible for the non-custodial parent to claim the exemption if the custodial parent signs a waiver pledging that he or she won't claim it. (The non-custodial parent should attach the waiver, Form 8332, to his or her tax return.)
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But what happens if your ex doesn't play by the rules and claims a dependency exemption that's rightfully yours? Well, things could get messy for awhile.
If your ex beats you to the punch and files his or her tax return first, it is possible that he or she would be allowed the exemption -- at least temporarily, says IRS spokesman John Lipold. But once your return enters the system and the IRS computers detect a duplicate Social Security number (your child's) being claimed by another taxpayer, the fun begins. "The IRS would look at both returns, and if the parents can't agree on who claims the exemption, then the IRS would apply the tie-breaker rule," Lipold says.
The tie-breaker rule dictates that if two parents both claim the same child as a dependent, the IRS will decide in favor of the parent with whom the child lived for the longer period of time during the year. And if the child spent an equal time with each parent, then the parent with the higher adjusted gross income gets the exemption.
But all that could take a while. In the meantime, your tax return could be adjusted to reduce your refund or increase your amount of tax due until the dependency issue is resolved. It could even trigger an audit. Once the issue is resolved, the parent who wrongly claimed the exemption would be required to repay the tax, plus interest and penalties.
For more information, see our Life Stages section on divorce and taxes or consult IRS Publication 504, Divorced or Separated Individuals.
-
Stocks Hit Fresh Highs Ahead of the Fed As Earnings Pump Optimism: Stock Market TodaySHW and UNH were two of the best Dow Jones stocks Tuesday, thanks to solid earnings reports, and MSFT closed with a $4 trillion market cap.
-
Selling Your Haunted House? What You Have to Tell Buyers (and What You Don’t)You don’t need ghosts to spook buyers, sometimes a home’s past is enough. Here’s what sellers should know about disclosure laws, pricing and perception when a property has a haunted history.
-
Three Critical Tax Changes Could Boost Your Paycheck in 2026Tax Tips The IRS predicts these tax breaks may change take-home pay in 2026. Will you get over $1,000 in tax savings?
-
RMDs, Roth, and SS: Test Your Knowledge of Retirement Tax RulesQuiz Don't let the IRS catch you off guard. Take our quiz to reveal common retirement tax rules that could save (or cost) you thousands.
-
IRS Reveals New 2026 Child Tax Credit and other Family Credit AmountsTax Credits Key family tax breaks are higher for 2026, including the Earned Income Tax Credit and the Adoption Credit. Here's what they're worth.
-
Claiming the Standard Deduction? Here Are Five Tax Breaks for Retirement in 2025Tax Tips If you’re retired and filing taxes, these five tax credits and deductions could provide thousands in relief (if you qualify).
-
IRS Names Its First CEO: But He’s Also Still Running Social SecurityTax News Will this new role make it difficult to address emerging issues like budget and staffing cuts and customer service concerns?
-
Three Popular Tax Breaks Are Gone for Good in 2026Tax Breaks Here's a list of federal tax deductions and credits that you can't claim in the 2026 tax year. High-income earners could also get hit by a 'surprise' tax bill.
-
IRS Phasing Out Paper Checks: What Happens After September 30?Tax Changes Avoid delays when IRS tax refunds and Social Security paper checks are cut off. Here’s what to know.
-
Ask the Editor, September 12: Tax Questions on 529 Plan Rollovers to a Roth IRAAsk the Editor In this week's Ask the Editor Q&A, we answer four questions from readers on transferring 529 plan money to a Roth IRA.
