Tax season is stressful enough. It can be even more so if you are recently separated or divorced and share custody of your children. Many parents are unsure how to handle tax filings in these situations, which can add unnecessary tension to an already complicated process. If you are a parent who is divorced or separated and shares custody, read on to learn about filing taxes when you share joint custody.
Who Claims the Child Tax Credit?
One of the most common questions we hear is: Who gets to claim the child tax credit? The IRS allows only one parent to claim a child as a dependent each year. In most cases, this is the parent with whom the child spends the most nights. However, parents can agree to alternate years or split exemptions if they have multiple children—provided this is outlined in a clear, written agreement.
In Colorado, tax exemptions are typically divided in proportion to each parent’s financial contribution to raising the child. If there’s no agreement, the court will decide how the exemption is allocated. That’s why having a well-structured parenting plan that includes tax considerations is so important.
Head of Household Status
Claiming head of household status can provide significant tax benefits, but it’s not always straightforward for newly divorced parents. Generally, the IRS requires that the qualifying parent have most of the parenting time. Since Colorado law doesn’t always designate a “primary” parent in joint custody arrangements, some parents choose to allocate just one extra overnight to ensure eligibility.
Why a Clear Agreement Matters
A well-drafted parenting plan can help you:
- Avoid disputes over who claims tax credits
- Ensure both parents benefit fairly
- Prevent last-minute surprises during tax season
Can Parents Alternate Claiming the Child Tax Credit?
In some cases, parents can take turns claiming the child tax credit. This is why it’s essential to have a clear agreement in place. The IRS only allows one parent to claim a child as a dependent each year. In joint custody situations, parents can alternate years if they both agree and properly document the arrangement. This typically requires the custodial parent to sign IRS Form 8332, which allows the non-custodial parent to claim the child for tax purposes.
In Colorado, courts allocate the right to claim the child tax credit based on each parent’s financial contribution to raising the child, rather than just parenting time. If parents cannot agree, the court will decide based on their proportional income. For example, if both parents earn roughly the same amount, they may alternate claiming the credit each year. If one parent contributes significantly more financially, they may be entitled to a larger share of the tax benefits.
Parents with multiple children may have additional options—such as each parent claiming one child annually or alternating claims for all children in different years. Because tax implications can be complex, it’s always best to outline these details in your parenting plan and keep a written record to avoid future disputes. An experienced family law attorney can help ensure your rights are protected while crafting a tax agreement that works for both parties.
Contact Our Colorado Family Law Firm to Help With a Parenting Plan
At Solutions Based Family Law, we understand the importance of developing a comprehensive parenting plan that considers all the intricacies and implications of filing taxes when parents share child custody. We have extensive experience in Colorado family law and are here to help you develop an effective parenting plan that includes directives regarding tax filing so families can minimize future disputes.
Our Colorado family law attorneys will work with you to protect your interests while developing your parenting plan. This includes ensuring that agreements regarding who gets to claim specific dependents for tax purposes are transparent, fair, and legally binding. We’ll review your situation thoroughly and advise on how best to allocate dependent children for income tax purposes within your agreement to avoid unnecessary disputes in the future.
Contact us at (720) 420-3610 or visit our website to learn how we can help.
Disclaimer: Smith Balicki Finn Laraway, LLC is not a tax law firm. Tax laws change frequently. All information contained in this blog was current as of the first publication and has not been updated since creation.