@choffmann2021 wrote:
I have a few questions unique to my experience--
My husband has two children from a prior relationship and one with me. They have 50/50 custody but he has them every Wednesday, Thursday, and every other weekend. If you count the days in 2021, he had one extra overnight (not counting the additional days she refused to pick them up on time). His AGI is higher than hers, which resulted in him paying child support and covering them on insurance despite their 50/50 arrangement (there is no court order, they are in the process of establishing that now). According to IRS rules, he has legal right to claim both children due to physical custody correct?
Next question, he has recently quit his job to stay home due to the number of children we have in daycare between the two of us. He continues to have 50/50 custody, pays child support, and the kids are under my insurance. For next year, will our joint AGI work as a tiebreaker or just his portion of income for the year?
If the two children by prior relationship slept in your home 183 or more nights—regardless of the reason—then you are the custodial parents for 2021 under the tax laws, and you are allowed to claim the children as dependents without requiring form 8332 from the other parent. The AGI of the parents doesn't enter into it, nor does the total amount of support each parent paid, just the number of nights.
Notice I say "you are allowed" without making a difference between you and your spouse, because a step-parent has the same legal right to claim a child as a biological parent.
Where you need to have caution is with regard to any court order regarding custody and claiming a dependent. If there is a court order that says, for example, you will alternate years, and this is the other parent's year, you may be in violation of the order if you claim the children. The IRS will accept the claim, but the other parent could ask for the state court judge to take action against you. Also, if the other parent also claims the children as dependents, you will need to prove you had custody more than half the nights. So make sure your documentation is in order, whatever proof you can come up with to show that the children lived in your home more than half the nights of the year. (In a regular year with 365 days, 183 or more nights is more than half and 182 or less is less than half.)
For 2022, the same principle is true. The custodial parent is where the children lived more than half the nights of the year. The amount of support each parent pays is never a factor, and the AGI of the parents is only a tiebreaker if the children lived exactly half the nights with each parent, which is generally impossible if it is not a leap year.
