February 2017: Dependency Exemptions for Divorced or Separated Parents

Michigan Family Law Journal : TAX TRENDS AND DEVELOPMENTS Feature

by Joseph W. Cunningham, JD, CPA

Excerpt:

At this time of year, questions often arise as to which of two parents—recently divorced or presently separated—is entitled to the dependency exemption for a child of the marriage.

General Rule under IRC Section 152(e)

IRC Section 152(e) provides a special rule for the right to claim an exemption of a child of divorced or separated parents who, for the year in question:

  • Are divorced or separated under a decree of divorce or separate maintenance at year end; or,
  • Are separated under a written separation agreement at year end; or,
  • Have lived apart at all times during the last six months of the year.
  • And, on a combined basis, had custody of the child for more than half the year; and,
  • On a combined basis, provided more than half the child’s support for the year (support received from a new spouse of a remarried parent is considered provided by that parent).

If these conditions are satisfied, the custodial parent (defined as the parent having physical custody for more than half the year) is automatically entitled to the exemption for a child regardless of:

  • of what the decree or agreement provides
  • which parent furnished more than half of the child’s support.

Waiver Exception to General Rule

For any specified year, or years, or for all future years, the custodial parent may release his or her right to claim the exemption for a child to the noncustodial parent.
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Continued in PDF file below… “Dependency Exemptions for Divorced or Separated Parents”
View / Download February 2017 Article – PDF File

Complete Michigan Family Law Journal available at: Michigan Bar website – Family Law Section

April 2014 : Selected Tax Provisions Related to Children of Divorce – Part 1

Michigan Family Law Journal : TAX TRENDS AND DEVELOPMENTS Feature

by Joseph W. Cunningham, JD, CPA

Excerpt:

The following presents basic information regarding two federal income provisions applicable to divorced or legally separated parents with one (or more) dependent child. In next month’s column, additional child-related provisions will be presented.

Dependency Exemptions

General Rule

IRC Section 152(e) provides that if the parents, on a combined basis, (1) provide more than half a child’s support for the year and (2) have physical custody for more than half the year, then the parent having physical custody for more than half the year (the custodial parent) is entitled to the exemption.

The custodial parent may “release” the exemption to the other parent by executing a written waiver for (1) one year, (2) a specific number of years, or (3) all future years. IRS Form 8332 is the waiver that the custodial parent must execute to release the exemption. e non-custodial parent must attach the executed Form 8332 to his/her tax return for the year(s) for which the exemption has been released.

Other Aspects of the Dependency Exemption

  • The above applies to parents living apart for the last six months of the year as well as to divorced or legally separated parents.
  • “Physical custody” for more than half the year is deter- mined based on overnights. If overnights are equal, the parent with the higher adjusted gross income is deemed the custodial parent.
  • The waiver can be used to, effectively, provide that the parents will claim the exemption in alternating years.
  • Support provided by a parent’s new spouse, or his/her parents, is deemed provided by the parent.
  • The custodial parent may revoke the waiver by executing Part III of Form 8332. Such a revocation applies to the succeeding tax year.
  • The federal income tax exemption amount is $3,950 for 2014. It is also $3,950 for 2013 Michigan Income Tax (the amount for 2014 has not been released, but will not likely be less than $3,950).

Phase-Out of the Tax Benefit of Personal and Dependency Exemptions

The phase-out of the tax benefit of personal and dependency exemptions for high income taxpayers was repealed for 2010-2012, but reinstated as of January 1, 2013.

The adjusted gross income (AGI) amounts at which the phase-out applies are as follows for 2014:
(Table shown in PDF file below)
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Continued in PDF file below… “Selected Tax Provisions Related to Children of Divorce – Part 1”
View / Download April 2014 Article – PDF File

Complete Michigan Family Law Journal available at: Michigan Bar website – Family Law Section