FAQ: Who Receives the Child Tax Credit?

QUESTION: My Judgment states I am required to alternate the tax dependency for my children with my child’s other parent, but the 2017 Tax Act eliminated tax dependency exemptions so do I have to share the Child Tax Credit with the other parent and follow my decree ?

It is now true, dependency exemptions are now called “Child Tax Credits” and the  Internal Revenue code provides that the custodial parent, which they define as the parent who has the child more than half the year, qualifies for the Child Tax Credit. Although, technically under federal law we no longer have “dependency exemptions” it is our opinion the court will follow a party’s Judgment of Divorce (or Judgment of Custody in the case of unmarried parents) and divide the tax benefits related to the child as ordered in the Judgment.  If a parent goes against the Judgment and refuses to release the Child Tax Credit to the other parent, Michigan Family Court may order a parent to re-file their tax returns and/or financially compensate the non-defaulting parent.  This is because in Michigan our state courts have the authority to award exemptions and/or tax credits related to children to either parent.

If your Judgment orders the children’s tax dependency exemptions to be alternated between each parent, the Court will require the custodial parent to release the Child Tax Credit for the years required in your Judgment. The party obligated to waive the credit  for an applicable year will need to complete and file IRS form 8332 . Form 8332 is the form custodial parents must file to release their right to claim a child as a dependent/tax credit to the noncustodial parent. Failure to sign the Federal tax exemption form when required by the Judgment may result in liability or financial consequences such as taxes paid and resulting fees and costs.  If your Judgment is silent, the Internal Revenue Code controls.

PLEASE NOTE: This blog is not intended to constitute legal and/or tax advice.  We do not recommend making important decisions of the type addressed in this article without specific legal or tax advice by a licensed accountant or lawyer.