First of all, if you are living together in the same home as the other parent, then one parent lists the child on their tax return and answers no to the custody agreement question, and the other parent does not list the child at all. The special rules that I will discuss below only apply when the parents are divorced or separated and live in separate homes.
The only parent who has the automatic right to claim a child as a dependent is the parent or the child lives more than half the nights of the year. You don’t get credit for paying child support and you don’t get credit for taking care of the child during the day. If the child does not live with you more than half the nights of the year, you can’t claim anything on your tax return unless the custodial parent gives you a signed form 8332 dependent release.
On the other hand, if the child lives with you more than half the nights of the year, then you are the only parent with the automatic right to claim the child as a dependent, and the other parent cannot claim anything unless you give them a signed form 8332 dependent release. The IRS rules are based on where the child lives, not any custody order, and if the child’s living circumstances change from year to year then the parent who is allowed to claim them may also change even if the court orders don’t change.
Form 8332 only transfers the child tax credit. The ability to use the child to qualify for head of household status or earned income credit or the dependent care expense credit can’t be waived, shared, or transferred.
If the child lives with you more than half the nights of the year, and you have an agreement at the other parent can claim the child, then you give the parent for sign form 8332. You list the child in your tax return and say that they live with you more than half the year and then answer yes that you will give the other parent the release form. TurboTax will print a release form for you to give to the other parent and TurboTax will include the child on your tax return for head of household status and earned income credit if you qualify. The other parent must indicate in TurboTax that the child does not live with them and they will only claimed a dependent because of form 8332. The tax program will give them the child tax credit but will not claim the child for head of household or EIC, and they must mail the original signed form 8332 to the IRS after e-filing the rest of their return. If both parents follow the rules, this will not create a conflict and both parents will be able to e-file.
