Dependency exemption and divorce

The allocation of a dependency exemption (child tax credit) can not only have an impact on the amount of your taxable income, it can also impact the child support award. However, The IRS rules and laws of the State of Michigan can provide for different allocations of the exemption.


The dependency exemption after divorce.

The IRS Rules regarding regarding the child tax credit.

For tax year 2021, the child tax credit is up to $3,600 or $3,000 depending on the age of your child. To qualify for a dependency exemption under the IRS rules, the dependent must earn less than $4,300 in 2021 and you must provide more than 1/2 of their annual support. Unfortunately, only one parent can take the exemption in any given tax year.

The IRS Publication 504 (see pages 8-9) explains in greater detail the tests to be a qualifying child.

From a child support perspective the allocation of a dependency exemption to a parent can reduce his/her income and change the support obligation. For example, when the payer of child support is awarded a dependency exemption his/her post-tax income is reduced and in turn so is the child support amount.

A Michigan Court can award the dependency exemption to either parent even if doing so is contrary to the IRS rules.

It is important to understand under Michigan law, a trial court have authority to award a dependency exemption for children of divorce or separated individuals even if the award is inconsistent with the IRS rules. For example, it is not uncommon for a court to order parties to alternate the dependency exemption for a child in cases of equal parenting time (or sometimes even in cases with unequal parenting time).

The seminal Michigan case in support of this notion is the Michigan Court of Appeals case, Fear vs. Rogers.

. . . we hold that it is within the general authority of the trial court to award the federal income tax dependency exemption for the minor children to either party . . .

Fear v. Rogers, Docket 147247, decided December 5, 1994.

In circumstances when a parent wrongfully takes the dependency exemption, a court can compel a party to revoke the exemption by completing IRS form 8332 entitled “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent”.

In sum, even if you qualify to take the child tax credit on your Federal income tax return, a Michigan Court can award the exemption to the other parent and enforce the award.


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