If you fill out form 8332 and release the dependent to your ex, your ex can claim the $2000 child tax credit, or the $500 dependent credit if the child is age 17 or older. Your ex cannot use the dependent to qualify for head of household status, earned income credit, or to claim the child and dependent care credit. Those tax benefits always stay with the custodial parent and can’t be waived, transferred, or shared, even with the court order.
In TurboTax or a similar tax program, your ex would indicate that the child does not live with them, but that they are providing a form 8332. This will create the proper dependent claim in the ex’s tax return. The ex will be required to mail the original signed form 8332 to the IRS with a cover letter after e-filing the rest of the tax return. Meanwhile, you would indicate that the child does live with you more than half the year, but that you are releasing the dependent to your ex with form 8332. TurboTax will qualify you for earned income credit, head of household status, and dependent care expense credit, if you meet the other qualifications for those benefits, but will not claim the child tax credit.
If you do not sign the form 8332, the IRS will not take any action against you, but your ex can take you to family court and file contempt charges against you.
