If you are about to go through a divorce or an allocation of parental responsibilities case, you may be wondering whether you or the other parent is entitled to claim the tax dependency exemption. By statute, unless the parties reach an agreement otherwise, the court will allocate the right to claim dependent children for income tax purposes between the parties. C.R.S. § 14-10-115 (12).
Specifically, the court must allocate these rights in proportion to the parties’ respective contributions to the costs of raising the children. So, for instance, if you and the other parent each contribute equally towards raising your kids, you can probably expect an order that allows you to claim the exemption in alternating years. In addition, you may NOT claim your child as a dependent if you have not paid all court-ordered child support for that tax year, or if claiming the child as a dependent would not result in any tax benefit to you.
Even if the parents’ contributions toward the children aren’t exactly equal, the court will generally award the parents the ability to claim the children in alternating years so long as their contributions are somewhat equal. For instance, in In Interest of A.R.W., 903 P.2d 10 (1994), evidence that the father’s support obligation was 61.9% of the total amount paid supported the trial court’s decision to award the income tax exemption for child to the father in alternate years. Alternatively, some courts have held otherwise. See, e.g., In re Marriage of Cardona and Castro, 321 P.3d 518 (2010) [trial court’s allocation of dependency tax exemption for minor children such that husband and wife were permitted to claim one child every year, was not in proportion to contributions to costs of raising child and thus violated governing statute, where percentage of income attributed to husband on child support worksheet was 65 percent, as compared to wife’s 35 percent].
Moreover, even if the parties initially come to an agreement regarding the allocation of the tax dependency exemption, the court maintains jurisdiction to modify the allocation upon a showing of a substantial and continuous change of circumstances. In re Marriage of Oberg, 900 P.2d 1267 (1994). However, if the court modifies the allocation of the tax dependency exemption, it CANNOT make the exemption retroactive – i.e., it cannot force one party to amend his or her already-filed tax return to change the exemption.
Note that if you have more than one “qualifying child,” and you claim the dependency exemption, the IRS allows you to claim one exemption for each child that qualifies as a dependent. Per the IRS’ rules, a qualifying child would be your biological son or daughter, stepchild, or foster child who is under the age of 19.
How much is the dependency exemption? Although the particular amount changes each year, the exemption amount for 2016 was $4,050.00 per child.
Please contact the Domestic Team at Feldmann Nagel Cantafio Margulis, PLLC for all of your family law needs