When a couple divorce, the divorce decree may grant the noncustodial parent the right to claim a child or children as dependents for tax purposes. While the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, reduced the personal exemption for taxpayers, spouses, and dependents to zero for tax years 2018 through 2025, the special rule of Sec. 152(e) allowing a noncustodial parent to claim a child as a dependent is still important because it also allows the noncustodial parent to claim a child tax credit, which the TCJA increased and expanded. To claim this tax benefit, however, the noncustodial taxpayer should closely follow the special rule's statutory and regulatory requirements, about which taxpayers often have misperceptions.
Sec. 152(e) applies to parents who are divorced, legally separated, or living apart during the last six months of the calendar year and provide more than one-half of the child's support for the calendar year. The child must be in the custody of one or the other parent for more than half of the year (Sec. 152(e)(1)). If these requirements are met, the custodial parent may then release the right to claim a dependency exemption under Sec. 152(e)(2) to the noncustodial parent. To release his or her claim to the dependency exemption, the custodial parent must sign a written declaration for the years that he or she is not claiming the child as a dependent, which must be attached to the noncustodial parent's tax return.
FORM 8332 OR WRITTEN DECLARATION
The IRS issued Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, for parents to use to satisfy the written-declaration requirement. Form 8332 requires the custodial parent to furnish the name or names of the child or children for whom the claims are released, the year or years for which the claims are released, the custodial parent's Social Security number (SSN), and the name and SSN of the noncustodial parent. The custodial parent must also sign and date the form. Use of Form 8332 is not mandatory, though, and parents may satisfy the written-declaration requirement by attaching a document conforming to the substance of the form and executed for the sole purpose of serving as a written declaration under Sec. 152 (Regs. Sec. 1.152-4(e)(l)(ii)).
A court order, decree, or separation agreement executed in a tax year beginning after July 2, 2008, may not serve as a written declaration. Additionally, the written declaration must...