Whether married parents are going through a divorce or unmarried parents are going through a custody case, parents have to address who will claim the children for a tax dependency exemption.
There was a change in 2015 to Minnesota Statute Section 518A.38 on how this issue is to be handled. The statute states:
The court may allocate income tax dependency exemptions for a child and require a party who has the child in the party’s physical custody for more than one-half of the calendar year to provide a properly executed declaration that releases the party’s claim to the child as a dependent under section 152(e) of the Internal Revenue Code of 1986, as amended, to the other parent.
So, what does a judge have to consider here? The statute goes on to state the judge has to consider:
1) the financial resources of each party;
(2) if not awarding the dependency exemption negatively impacts a parent’s ability to provide for the needs of the child;
(3) if only one party or both parties would receive a tax benefit from the dependency exemption; and
(4) the impact of the dependent exemption on either party’s ability to claim a premium tax credit or a premium subsidy under the federal Patient Protection and Affordable Care Act, Public Law 111-148, as amended, including the federal Health Care and Education Reconciliation Act of 2010, Public Law 111-152, and any amendments to, and any federal guidance or regulations issued under, these acts.
It is very important for parents to have a court Order that lays out a specific parenting time schedule. Without one, a judge would likely give the custodial parent the right to claim the children, thus leaving the other parent who pays child support but does not have much parenting time without the financial benefit of claiming a child for taxes. A skilled family law attorney helps clients create a strategy to get the best tax benefit.