The IRS goes by physical custody when they are stating non-custodial and custodial.

The parent who has the child more that 1/2 the year is considrred the custodial parent by the IRS regardless of which one the court has issued as custodial parent.

Legal custody by a court is not Tax custody. The custodial parent that has physical custody by IRS rules (Federal law) can claim the child unless they release the exemption to the other parent with a signed Form 8332 form. The non custodial parent can then claim the exemption and child tax credit - nothing else. Without the Form 8332 for the non-custodial parent can claim nothing.

A court order cannot override Federal tax law, but must be enforced by the court that issued the order by holding the parent that refuses to issue the required Form 8332 form in contempt of court with possible criminal penalties.

The physical custodial parent has the child in their custody more than 180 days/yr. They are the ones who claim all credits and deductions for the child regardless of who the courts have awarded as the custodial parent or as the parent that gets to claim all deductions, credits and exemptions For the court awarded custodial parent to claim the child the physical custodial parent (IRS tax law) would have to issue the Form 8332 form to the non custodial parent (IRS tax law).

The IRS will not referee divorce custody situations - they go strictly by physical custody. If the custodial parent refuses to provide the signed Form 8332 so that the non-custodial can claim according to a local court decree the remedy is the family court that entered the order. The parent could be held in contempt but the IRS will not get involved.

There is one exception and that is pre-2009 divorce decrees that meet the strict IRS requirements (not many do).

Post-1984 and pre-2009 divorce decree or separation agreement. If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332 . The decree or agreement must state all three of the following.

1. The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support.
2. The custodial parent will not claim the child as a dependent for the year.
3.The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent.

The noncustodial parent must attach all of the following pages of the decree or agreement to his or her tax return. * The cover page (write the other parent's social security number on this page). * The pages that include all of the information identified in items (1) through (3) above. * The signature page with the other parent's signature and the date of the agreement.

Post-2008 divorce decree or separation agreement. The noncustodial parent cannot attach pages from the decree or agreement instead of Form 8332 if the decree or agreement went into effect after 2008. The custodial parent must sign either Form 8332 or a similar statement whose only purpose is to release the custodial parent's claim to an exemption for a child, and the noncustodial parent must attach a copy to his or her return. The form or statement must release the custodial parent's claim to the child without any conditions. For example, the release must not depend on the noncustodial parent paying support.

Form 8332 rules:

Attach this form or similar statement to your tax return for each year you claim the exemption for your child. You can claim the exemption only if the other dependency tests in your tax return instruction booklet are met.

Child Support and Taxes: Non-Custodial Parent FAQs

Child custody arrangements and income are significant factors in determining both child support award amounts and income tax return obligations. Since custody, income, and child support are closely connected, child support responsibilities can affect a non-custodial parent’s tax returns. This article answers some frequently asked questions about how child support payments can impact a non-custodial parent’s Internal Revenue Service (IRS) tax filings.

How does income affect child support orders?

When establishing a child support order, a judge generally must follow specific state guidelines. Those guidelines are “income driven,” meaning the support amount is determined primarily by the income of the parties. It's important for parents to understand what funds, (beyond simple wages and salary) are considered "income" under the child support guidelines. For example, the income of a new spouse, to the extent that income directly reduces the expenses of the custodial parent, is considered income for child support purposes.

Does the IRS consider child support to be income?

No. Although there is a relationship between child support and taxes, the IRS doesn't consider child support payments as taxable income. That means taxes for non-custodial parents who pay child support can't include deductions for the child support payments and, on the flipside, child support payments do not count as taxable income to the payee (custodial parent). The bottom line: when calculating your gross income to see if you're required to file a tax return, don't include child support payments made or received.

Does Form 8332 affect the Child Tax Credit?

Yes. Certain individuals may claim a tax credit for their dependent children. Only the parent using the dependency tax exemption can claim the Child Tax Credit. A custodial parent may use Form 8332 to release the exemption to the non-custodial parent. In that case, the non-custodial parent would qualify for the dependency exemption and therefore the Child Tax Credit.

Refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for Child Tax Credit for further details about qualifications and calculations.

If the non-custodial parent receives permission from the custodial parent to claim a child on his or her tax return, is the non-custodial parent eligible for the Earned Income Credit?

Probably not. The Earned Income Credit (EIC) is a tax credit for people who work and earn income below a certain amount. There are particular rules a person must meet to be eligible for an EIC . Some parents may be able to receive an EIC if they have a “qualifying” child. Generally, non-custodial parents cannot claim the EIC on the basis of their children because the children do not live with that parent and consequently do not meet the residency test. If the custodial parent meets other requirements, he or she may be able to claim the EIC.

Get Help with Your Child Support and Taxes Questions

Whenever taxes and child support mix, it is usually a complicated situation -- whether you're a custodial or non-custodial parent. If there's a large sum of money involved, you're almost certainly better off speaking with a professional. If you need help knowing where to begin or are looking to hire legal counsel, find a family law attorney near you with experience in such matters.

At Nugent & Associates, we're not just number crunchers. We bring over 3 decades of invaluable certified public accounting and tax expertise to your company – serving as business and financial strategists who can offer such services as tax and financial planning, investment advice, diligent financial records, and help with estate planning.

Even better, we will give you time to focus on what you do best: running the day-to-day operations that drive your business toward success.

Take advantage of our FREE and no obligation business checkup.

We will visit you at your business at a time and day convenient for you, analyze your numbers, discuss your goals and concerns and report back with a complimentary detailed written analysis to help your business succeed!

At Nugent & Associates, we're not just number crunchers. Our people bring decades of invaluable certified public accounting and financial and tax expertise to you – offering tax and financial strategies to individuals such as yourself. If you have any questions or concerns about your own tax, financial or investment matters, please do not hesitate to contact us.

Experienced tax and financial experts are not just for the super rich. At a reasonable fee you too can maximize your wealth and receive professional guidance for retirement, and/or any tax issues you may be facing, no matter your situation, with a tax and financial expert as your consultant.

Contact Nugent & Associates today. We don't charge for phone calls. You may just find you found an ally in your quest to have a great financial future.

After all, at Nugent & Associates, we succeed when you succeed!



This page is intended to be informational. This website, nor any of the information contained on this site constitutes professional, business, tax or legal advice and is not a substitute for such advice nor does it create a professional-client relationship between you and Nugent & Associates.

State and federal laws change frequently, and the information in this page may not reflect your own state’s laws or the most recent changes to the law.

The information contained within this website should not be considered as a solicitation or an offer for a professional-client relationship. Materials contained in this website are of a general nature and should not be substituted for professional advice. Nugent & Associates is providing this website and the information contained herein only as a convenience to you. Nugent & Associates assumes no liability or responsibility for any errors or omissions contained within this website. There is no guarantee that the information included on this site is current, accurate, complete, useful, or reliable.

Tax Planning & Preparation

We assist our clients in individual and business tax planning throughout the year.

Nugent & Associates provides:
  • Year-Round analysis to ensure a smooth and predictable year-end close.
  • Assist in establishing retirement planning.
  • Performs in-depth review of all deductions available.

Financial Statements

Nugent & Associates offers outstanding accounting services and acts as a quasi-controller for companies who do not employ their own full-time accountants.

This allows our clients with more time to focus on new services, new customers and other core business issues.

Business Planning, Budgeting
& Growth Strategies

Nugent & Associates assists it clients with:
  • Starting a new venture, product or service
  • Expanding a current organization, product or service
  • Buying a new business, product or service
  • Turning around a declining business

QuickBooks Training
& Support Services

As Certified QuickBooks Professional Advisors, we can be of assistance with QuickBooks accounting or payroll and help increase your productivity and efficiency.