Can I claim my children on a state return, but not federal?

[Tims1416]

I have a very complicated situation: My ex and I both live in the same state (NV) where there is no state income tax. However, I just took a work-from-home job that will require me to pay IL state income taxes. Our custody agreement states that we alternate years claiming our child as a dependent on our taxes, as we share 50/50 joint-physical custody. Normally, this would be the year that she would claim the child on federal taxes, but since she would not be filing a state return (NV), could I leave the child off my federal and claim the child as a dependent only on my IL return? 

To make things even more complicated, my current wife (who lives with me in NV) has 2 kids with her ex. He lives in ID, where there is a state income tax. Every year, he claims the oldest child and she claims the youngest. Federal taxes aside, is it possible for her ex to claim the oldest on the ID return, and for us to claim him on our IL return as well? 

[xmasbaby0]

Before we even try to untangle your questions----Please clarify-----you say you "just" took an IL job.    When?   Nothing you are doing in 2022 has any effect on what you enter on a 2021 tax return.

[Tims1416]

Technically, the job starts in 2022, so I have to fill out my W-4 for IL and choose the number of dependents to claim. While this won't have any direct effect on my 2021 returns, I'm trying to make some sense of how to manage the state tax side of things for the 2022 tax year. 

[xmasbaby0]

IL  follows the same laws pertaining to claiming a dependent as the IRS uses---it goes by custodial parent.   If you do not/cannot claim a dependent on your federal return it is not likely you can claim that dependent on an IL return.  Information flows from the federal return to the state return.  

Here are the rules for claiming a child when you file a federal return:

Are you the custodial parent?  Do you have an agreement with the other parent to allow the other parent to claim them--due to divorce or that you live apart and share custody?  Did one of you sign a Form 8332?

If there is a signed 8332 then the custodial parent retains the right to file as Head of Household, get earned income credit and the childcare credit.  The non-custodial parent gets the child tax credit for children under the age of 18.

As far as the IRS is concerned, the custodial parent is the one with whom the child spent the most nights during the tax year--at least 183 nights.

IRS interview to help determine who can be claimed:

https://www.irs.gov/help/ita/who-can-i-claim-as-a-dependent

https://ttlc.intuit.com/questions/3113432-who-can-i-claim-as-my-dependent 

@Mike9241    Your thoughts on claiming a dependent in IL if not claimed on the federal?    And it would be a non-resident IL return.

[Tims1416]

Thank you for the quick response. I have a pretty good understanding of the federal side, as far as dependents go. While neither of us have actual 8332's with our ex's, our dependent situation is covered in our divorce/custody agreements. Fortunately, all parties have played by the rules and there has never been an issue with the IRS at the federal level. 

As someone who has never had to file a state income tax, I wasn't sure how to work through the state level, since we reside in NV and only 1 of our 5 kids are claimed in a different state (ID) while the other child would only be claimed by us in even-numbered tax years. 

Basically, I cannot claim 3 dependents at the Federal level and 4 dependents with the State, if that 4th child is claimed by someone else at the Federal level.

[TomD8]

@Tims1416 wrote:  "However, I just took a work-from-home job that will require me to pay IL state income taxes."

If your work is going to be done entirely remotely from a NV location, you won't owe any Illinois income tax.  Illinois does not tax non-resident remote workers.

That said, any income you might earn from work actually (physically) performed in Illinois would be subject to Illinois income tax.