For taxes, the first thing you need to do is get it out of your head that you have 50/50 custody. For tax purposes, there is no such thing as joint custody, regardless of what your legal agreement says. The requirement, to be custodial parent, is that the child live with you MORE than 50% of the time. One of you has to be the custodial parent and the other the non-custodial parent. The IRS goes by physical custody, not legal custody.
In the rare case (could probably only happen in a leap year like 2024), where the time that each parent has the child is exactly equal, then the parent with the higher income (AGI) is the custodial parent, for the purpose of determining who has first priority on claiming the child as a dependent. But then neither parent can claim a Qualifying Child dependent, for some tax benefits because neither parent had the child the required MORE than half the year. (no earned income credit, based on that child, and the child would not qualify the parent for Head of Household filing status).
Yes, the IRS expects you to count the numbers of nights the child sleeps at each parent's home. It is allowed for you to arrange the children's schedules so that one child spends more than half the year with the father while the other spends more than half with the mother. Then you are each the custodial parent of one child.
It is allowed for you to arrange the child's schedule so that the child spends more than half the year with the father one year and more than half with the mother the next year so that you are each the custodial parent in the year you claim the child, so that you can claim full benefits.
Equal number of nights. If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income (AGI) (2012 Pub 17 pg 28).
Form 8332 is not required if you arrange their schedules so that the child you claim is with you more than half the year (or the parents agree to say it's so).
