I am divorced with 2 kids. We share equal custody and each will declare 1 kid. I am not sure how to properly record that in TurboTax2020. Please help.

[stovinj]

I have done this before on TurboTax, but have since changed computers (mac to pc) so I am starting over. It used to ask if I was declaring the child, but not on this version.

[macuser_22]

Enter the child in personal information dependents and answer the questions.

There is no such thing in the Federal tax law as 50/50, split, or joint custody. The IRS only recognizes physical custody (which parent the child lived with the greater part, but over half, of the tax year. That parent is the custodial parent; the other parent is the noncustodial parent.)

Who can claim the exemption and credits depends on who is the custodial parent. (By the IRS definition of custodial parent for tax purposes - this is not the same as the legal custody that a court might grant.).

The test that the IRS uses to determine the custodial parent is where the child lived for more than 1/2 (or greater part) of the year. The IRS will go so far as to require counting the nights spend in each household - that person is the custodial parent for tax purposes (if exactly equal and more than 183 days - The custodial parent is the parent with the highest AGI, if less than 183 days then neither parent has custody so the child cannot be claimed by either parent). And yes they are that picky.

See Custodial parent and noncustodial parent  in Pub 501

https://www.irs.gov/publications/p501#en_US_2018_publink1000220906

Only the Custodial parent can claim: (Child would be listed as non-dependent EIC & CC only)
-Head of Household
-The Earned Income Credit
-The Child and Dependent Care Credit
-The Health Coverage Tax Credit

The non custodial parent can only claim: (Child would be listed as dependent)
- The child as a dependent
- The Child Tax Credit or credit for other dependents

But only if specifically specified in a pre-2009 divorce decree, separation agreement or the custodial spouse releases the exemption with a signed 8332 form - after 2009 the IRS only accepts a signed 8332 form that must be attached to the non-custodial parents tax return.

[Critter-3]

Your situation is covered in IRS publications 501 and 504, which you should definitely read.

http://www.irs.gov/pub/irs-pdf/p501.pdf

http://www.irs.gov/pub/irs-pdf/p504.pdf

Briefly, there are 5 tax benefits of having a child dependent: Dependent exemption, child tax credit, dependent care credit, head of household, and eligible for EIC. The tax code assigns all 5 benefits to the parent who has custody more than half the time.  Custody is defined as where the child sleeps at night.  (If the child is on a sleep over of a camping trip etc, the day is counted toward the parent where the child would have slept if not for the event in question.)

So for the IRS there is no 50% custody, you have to count nights, and one parent will almost always have more than the other.  If for some reason the # of days is exactly equal (like in a leap year, 366 days, exactly 183 nights for each parent) then the tax benefits are assigned to the parent with the higher income.

If the divorce decree says that the non-custodial parent (parent with less than 50% time) gets the dependents in a certain year, the custodial parent must fill out and sign a copy of form 8332 and give it to the other parent, this releases the tax benefits to the other parent.  However, the form 8332 only transfers the dependent exemption and the child tax credit. Eligibility for Head of Household, Dependent Care Credit, and EIC always stays with the custodial parent and cannot be transferred.  The only way to transfer all 5 tax benefits from one parent to the other parent is to arrange the children's sleeping schedules so that the desired parent qualifies for the particular year.

If you are the custodial parent, then in the years when you give your ex the form 8332 allowing him or her to claim the dependent exemption and child tax credit, you can still qualify for EIC, Head of Household and the Dependent Care benefit.  You do this by carefully answering the questions in the dependent interview in turbotax by saying yes you have a dependent, and yes you are signing a form 8332 to allow the ex to claim the exemption.  Turbotax will assign a special status to your children of "Non-dependent, EIC or Care Credit Only"