Navigating the complexities of divorce is challenging enough without worrying about tax implications. One of the most contentious issues that often arises is who claims the kids on their tax return. In Colorado, like many other states, specific guidelines and factors influence who gets the tax break for the kids post-divorce. Understanding these can save both parents a lot of stress and confusion. At Johnson Law Group, we are committed to helping you understand these nuances.
Dependent exemptions and child tax credits are significant tax benefits that can substantially reduce the amount of tax owed. Post-divorce, only one parent can claim a child as a dependent, and determining who that is can be complicated. Factors like primary residence, custody agreements, and alternating custody situations are crucial in this decision.
The IRS has clear guidelines about which parent can claim a child as a dependent. Generally, the parent with whom the child resides for the greater part of the year (over 50% of the nights) is considered the custodial parent. This parent typically has the right to claim the dependent exemption and the Child Tax Credit.
However, divorce agreements and custody arrangements can alter this standard rule. If the non-custodial parent is to claim the child as a dependent, the custodial parent must sign IRS Form 8332, releasing their claim to the exemption for the specific tax year. This agreement must be clear in the divorce decree to avoid misunderstandings.
Sometimes, parents may agree to alternate who claims the child on their tax returns each year. For example, one parent might claim the child in even-numbered years, while the other claims them in odd-numbered years. This arrangement should be explicitly stated in the divorce decree and adhered to strictly to avoid disputes.
The Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC) are two of the most beneficial tax credits for parents. The CTC, as of 2024, can be up to $2,000 per qualifying child under the age of 17. The rules for claiming the CTC are similar to those for claiming a dependent exemption—the custodial parent generally gets the credit.
The EITC is a refundable credit for low—to moderate-income working individuals and couples, specifically those with children. The custodial parent is the only one permitted to claim the EITC, regardless of what the divorce decree says. The IRS requires the child to live with the claiming parent for more than half the year to qualify for the EITC.
Colorado follows federal guidelines closely when it comes to dependent exemptions and child tax credits. However, it’s important to check for any state-specific rules that may apply. Colorado offers a state Earned Income Tax Credit, which mirrors the federal EITC but can provide additional benefits for eligible taxpayers.
Understanding who gets the tax break for the kids after a divorce in Colorado can be complicated, but it doesn’t have to be overwhelming. By clearly outlining the terms in your divorce decree, maintaining good records, and seeking professional advice, you can ensure that both parents maximize their tax benefits and avoid unnecessary disputes.
At Johnson Law Group, our Colorado family law attorneys are here to help you navigate these and other post-divorce issues. If you have questions or need assistance with your case, please don’t hesitate to contact us at 720-445-4444 for a FREE consultation. We are dedicated to providing you with the guidance and support you need during this challenging time.
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