What happens on your tax return when your children are living with someone else (such as your ex-spouse)? As with every tax situation the answer is, “It depends.”

If your child doesn’t live with you due to a divorce, this can be quite complicated. Most divorce decrees will split the kids evenly for tax purposes and often has such language as child one will be claimed by one spouse and child two by the other. It can also say things like even numbered years they are claimed by Spouse A and odd years by spouse B. The problem is, that the IRS is a federal agency, and as such, they can ignore the divorce decree because they have their own regulations for when someone is a dependent. The IRS even has different regulations for claiming an exemption for that child, claiming head of household status and for earned income credits (EIC). To complicate matters even more, as far as the IRS is concerned, a child can be an exemption for one parent but the other parent could claim Head of Household status and claim Earned Income Credits. Things like child tax credits, child care credits and tuition credits could all go to the parent who claimed the exemption, no matter which parent paid the actual expenses. What a mess!

Because it doesn’t matter what the divorce decree says, Head of Household and EIC are taken by the parent or guardian who the child spends more than half their time with. Even if both parents lived right next door to each other and the kids go back and forth all the time, the parents need to come to an agreement and determine who has who with them for when and how long.

The exemption claim however, is not based on time – other people including grandparents could claim exemptions for the kiddos. The parent who has the child more than half the time must give the other parent a form 8332. This is a declaration of the custodial parent that they will not claim the exemption for that child – it can be for one year or it can have a list of which years it applies to. Unfortunately, the problem is that most lawyers don’t include this form as part of the divorce proceedings, giving the custodial parent control over when, or if, they will sign the form. In addition, this form does not say who they are giving the exemption to. This same form can be used to revoke the exemption claim, too, allowing the custodial parent to claim that child despite what the divorce decree states. Yes, you can force the issue by going back to court but that can take years.

Don’t depend on just your lawyer when getting divorced. Make sure you talk to a tax-professional to see how this is going to affect your taxes. The age-old advice about getting a divorce, “just think about the kids” is really truer than most people think.