Tax season is over and most people in Minnesota have already put the subject out of their minds for the time being. This is, of course, fine for the vast majority of people, but the same cannot be said for parents filing for divorce. Although the next tax season is almost an entire year away, addressing these types of issues as early as possible can help ensure a smooth passage into post-divorce life.
Of course, tax issues are also a concern for non-parents, as couples must decide when is the best time to file for divorce for tax purposes. The matter can be a bit more complex for parents, as claiming dependents is an annual affair. In general, the custodial parent is the one who claims the child on his or her taxes. Exceptions to this rule can be made based on a couple's individual needs.
Some parents opt to alternate the years they claim their child as a dependent. While this is usually outlined in the child custody arrangement, the IRS does not acknowledge this as giving legal priority to the non-custodial parent. In such instances, the custodial parent must expressly release his or her right to claim the dependent by signing a form that the non-custodial parent must submit with his or her own return.
Minnesota parents can still claim itemized deductions in regards to a dependent's medical expenses paid expressly by one parent, as well as other deductions, without needing to obtain a release from the custodial parent. However, claiming a child as a dependent usually results in the largest tax break for a parent. Since the custodial parent has the ability to claim a child, regardless of a what a divorce settlement outlines, it is generally best for divorcing parents to address this topic and how it will be handled as early as possible.
Source: marketwatch.com, "After the divorce: Which parent gets child-related tax breaks?", Bill Bischoff, May 13, 2016