While the divorce decree may state shared custody, the IRS does not recognize 50/50 custody for tax purposes. Whoever the child actually lived with more than half the nights of the year is the parent who is the custodial parent by tax law. The custodial parent may then relinquish the dependency exemption to the non custodial parent with a signed form 8332 or similar document.
Here is how the tax benefits are split. For divorced or separated parents or parents who live apart, the custodial parent, if eligible, or other eligible person who the child lived with for more than half the year, can claim head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. The non-custodial parent, if allowed by divorce decree or consent of the custodial parent on form 8332 or similar signed statement, can claim the dependency exemption and child tax credit. For post-2008 divorce decrees or agreements, form 8332 or similar signed statement is required. The child tax benefits cannot be split any other way.
