Who has actual physical custody in their home more than half the nights of the year (183 or more nights)?
The IRS follows physical custody and ignore custody orders. If you are the custodial parent (have actual physical custody in your home more than half the nights of the year) then only you have the automatic right to claim the child as a dependent. To allow the other parent to claim the child, you must give them a signed form 8332, which they must attach to their tax return. You are still allowed to claim head of household, EIC and the childcare credit (if you qualify) because those tax benefits can't be transferred to the other parent.
In TurboTax, you will answer that you cared for a child, that the child lived with you more than half the year, there is a custody agreement, and you did give the other parent a signed form 8332. Turbotax will not claim the dependent credit but will allow you to claim the child care credit or other benefits if you qualify.
If you are the non-custodial parent (have actual physical custody in your home less than half the nights of the year) then you can never claim the child care credit, even with form 8332 allowing you to claim the dependent credit.
