Many financial questions arise when you and your spouse decide to end your marriage. One of the most significant issues to address is which parent can claim the children as dependents on federal and state tax returns. This often becomes a source of disagreement between former partners. Having a lawyer to provide information during this transition can help you reach a fair resolution.
While discussing money with an ex-spouse may feel uncomfortable, it is a conversation you should have when experiencing a divorce. It is particularly important when you share children. Beyond determining who pays for monthly costs like housing, medical care, clothing, and food, you need a clear agreement for tax season.
Federal Tax Credits and Deductions for Parents
You can use various credits and deductions to lower the amount of tax you owe or reduce your taxable income. Deductions lower the total income the government looks at, while credits directly reduce the amount of tax you must pay.
When you claim a child as a dependent on your federal return, several benefits may apply. Under the latest federal tax changes, you might qualify for a Child Tax Credit of up to $2,200 per qualifying child. Additionally, the custodial parent may be eligible for the Child and Dependent Care Credit. This credit helps cover some of the costs related to paying for childcare so you can work or look for a job.
North Carolina Tax Reductions for Dependents
North Carolina provides a specific tax benefit for parents that depends on their income level and filing status. A parent may be able to file as head of household and reduce their taxable income based on the number of children they have.
In North Carolina, the child deduction amount for a single filer or someone married filing separately changes based on your adjusted gross income:
- Income up to $20,000 – $3,000 deduction
- Income between $20,000 and $30,000 – $2,500 deduction
- Income between $30,000 and $40,000 – $2,000 deduction
- Income between $40,000 and $50,000 – $1,500 deduction
- Income between $50,000 and $60,000 – $1,000 deduction
- Income between $60,000 and $70,000 – $500 deduction
- Income over $70,000 – $0 deduction
These specific amounts apply only to your North Carolina state tax filings.
Rules for Claiming a Dependent Child
Several factors determine who gets to claim a child on their taxes. If there is no court order or written agreement stating otherwise, the IRS typically allows the custodial parent to claim the dependent.
In North Carolina, the law considers you the custodial parent if the child lives with you for more than half of the year, which is at least 183 nights. If you provide the primary home and physical care for the child for the majority of the year, you generally hold the right to the dependency claim.
If you are the custodial parent but wish to let the other parent claim the child, you must use IRS Form 8332. This form allows you to:
- Give up your right to the exemption for a specific year
- Cancel a previous agreement to let the other parent claim the child
Agreeing on Dependency Claims
It is best to talk about tax arrangements with your former spouse as early as possible. If this topic is ignored during the divorce proceedings, it can lead to expensive legal battles later. Resolving the issue through an agreement allows you to maintain control rather than letting a judge make the choice for you.
Working with an attorney ensures you know what to expect during these talks. Typically, the parent who has the child most of the time claims the tax benefits. However, some parents choose to take turns, where one parent claims the child in even years and the other in odd years. If you agree to an arrangement like this, you must put it in writing.
If you cannot reach an agreement, you may need to go to court. A judge will look at your financial situation and custody arrangement to decide which parent receives the tax credits and deductions.
Speak with a Hendersonville Divorce Lawyer
Brad H. Ferguson provides dedicated support for clients going through the end of a marriage. We understand the stress involved in settling these financial details. Our goal is to ensure your rights are protected and your children’s best interests are prioritized.
If you need legal help with a North Carolina divorce, contact the Law Office of Brad H. Ferguson. We can help you understand your rights regarding your children and your finances. Our team has more than 15 years of experience in family law and criminal defense. Call (828) 660-0670 today to discuss your case.
Legal Disclaimer: The information provided on this site does not constitute a lawyer-client relationship and is for general informational purposes only. Attorney Brad H. Ferguson has not been involved in any cases mentioned on this blog. Content provided does not constitute legal advice and may not represent the most up-to-date information. No reader of this site should act or refrain according to the information given without first seeking legal counsel in their jurisdiction. If you have a pressing legal matter that needs attention, please contact our office via phone to schedule a consultation at 828-452-1655.