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Understanding Child-Based Tax ...


Tax season can be stressful enough without the added complication of disagreements and confusion over which parent can claim the child on their taxes. This issue doesn’t have to be complicated. Our experienced family law attorneys can help shed light on some of the most frequently asked questions so you can head into tax season confidently.

Frequently Asked Questions about Tax Issues for Parents Sharing Custody

Navigating the tax season as parents sharing custody can be a daunting task. Here are answers to some frequently asked questions that may clarify your situation.

  • How does Colorado law treat children-based tax credits? The Colorado Court steps in when co-parents cannot agree on child-based tax credits. The decision is made as part of the Permanent Orders in your Domestic Relations or Allocation of Parental Responsibilities. It is based on Colorado’s child support statute and case law. Colorado's child support statute states that the "dependency tax exemption" should be divided between the parties according to their contributions to raising the children. C.R.S. § 14-10-115(12). Additionally, the IRS now uses the term "child tax credit" instead of "dependency tax exemption." For this discussion, these terms are interchangeable and treated similarly by the Court.
  • How does the Court determine each parent's contribution? It's based on each parent's share of the combined gross income. If, for instance, your monthly income is $5,000 and the other party's income is $10,000, your combined income is $15,000. Since your income represents 33% of the total, you would likely be entitled to claim your child every third year, while the other party would claim the child for the remaining two years.
  • What if parties have similar incomes? If the parties have similar incomes and the Court determines that a child support obligation is not warranted, then the Court will likely order that the parties alternate claiming the child(ren) every year, as both parties are equally contributing to the financial needs of the child(ren). This calculation can be frustrating for parents with unequal parenting time schedules. Parenting time is not a factor in Colorado Courts’ determination of the dependency tax exemption/child tax credit allocation. Instead, Colorado law is written so that the parent making a higher financial contribution to the child(ren) may claim the child(ren) more frequently.
  • Can we agree on a different allocation of the dependency tax exemption/ child tax credit? Yes, if both parents agree, they can decide how to allocate the child tax credit. It's common for parents to agree on an alternating yearly schedule where one parent claims the child in odd years and the other in even years. If there's an even number of children, parents may agree that each parent can claim half of the children every year. As the children age out of eligibility, this typically transitions to an alternating schedule. This agreement should be outlined in the parenting plan submitted to the Court.
  • What if a parent is behind on child support? Colorado law stipulates that a parent behind on court-ordered child support as of December 31st of the tax year cannot claim the dependency tax exemption/child tax credit, even if it's their year to claim the child. Catching up on child support payments just before filing taxes will not change this, as the status as of December 31st is what determines eligibility.
  • What if the dependency tax exemption/child tax credit would not result in a tax benefit? According to Colorado law, if claiming the dependency tax exemption/child tax credit does not result in a tax benefit, a parent cannot claim the child, regardless of whether it is their year to do so.
  • What if we do not have parenting time orders? Refer to the IRS's guidelines in the absence of parenting time orders. IRS Publication 504 states that the custodial parent is entitled to claim the child tax credit. The IRS defines a custodial parent as the parent with whom the child spent the most nights during that tax year. If both parents had the child for an equal number of nights, the parent with the higher adjusted gross income may claim the child tax credit. The IRS's guidelines only apply if there are no parenting time orders.
  • What if there are income changes? If there are significant income changes, enough to result in a 10% or more change in a parent’s child support obligation, a request can be filed to modify the child support order. As part of this modification, a request can be made for the dependency tax exemption/child tax credit to be reallocated. However, until you have Court orders approving the modification, you must abide by your earlier orders.
  • What if a parent claims the child when it’s not their year to do so? A parent who claims the child when it's not their allocated year, as per the parenting plan or the Court’s permanent orders, is in violation of Court orders. If this happens, it's advisable to consult a family law attorney about the best way to address this issue.

Contact Solutions Based Family Law Today

Navigating the complexities of child-based tax credits during a separation or divorce can be overwhelming, but you don't have to face these challenges alone. The experienced divorce attorneys at Solutions Based Family Law are here to guide you through every step. We understand the intricacies of Colorado's laws and how they apply to your unique situation. Whether you need help understanding child tax credit allocation, modifying child support, or addressing violations of court orders, we're here to provide the legal support you need. Don't hesitate to secure the best future for you and your children. Contact our attorneys at (720) 463-2232 or send us a message online right now.