Complex Situation

[CuriousK]

So, I had my child and ended up in trouble and lost her. She was adopted since my sentence was way longer than my state could foster a child. Fast forward many years and I now have legal custody of my child. However, her adoptive parents still have parental rights and are the ones on her birth certificate. A judge ordered she live with me full-time at the beginningof the year. She has been with me all year and does not visit them. I read a little about how it depends on where the child is living but honestly, our case is rare. Who files taxes in this situation? I house her, feed her, clothe her, drive her 4 hours to her dr appts monthly since we have not switched to be closer to where I live. They help here and there but I have taken full responsibility. I have not claimed a dependent on my taxes for work yet because I do not want to get in trouble with this situation. Any advice would be great. 

[Bsch4477 · Accepted solution]

If I understand correctly, you are the biological parent with whom the child lived all year but the child has parents who had adopted her in your absence. Assuming the other qualifications for dependency are met you would have the right to claim her as a dependent since she lived with you. You should discuss this with the other parents since if they also claim the dependency both of your returns will be questioned by the IRS and both will have a mess to deal with. 

[CuriousK]

Yes, you understand correctly. The adoptive parents and I will definitely have a conversation here soon. I just wanted to be sure I had a right to legally claim her when it came to filing before having that conversation. If I did not have a right to claim her, there would be no need for a conversation. The GAL said I could start claiming her as a dependent through work and on taxes but I did not do it. A good bit of what I read, it sounds like wherever the child is residing, claims them. However, they talk about divorced parents and family. I am the biological mom but the only rights I have are what the courts gave me, I am nothing more than a person with physical custody until 18 in their eyes. Yes, we all know I am "mom" but by looking at all documents after the adoption, no one else would know that unless they pulled the original birth certificate. That is why I wanted to ask here. So thank you! I appreciate your response.  

[Opus 17 · Accepted solution]

The rules are in publication 501.

https://www.irs.gov/pub/irs-pdf/p501.pdf

An important concept is that the IRS follows federal law, which is summarized in the publication.  The IRS, for the most part, doesn't care about state custody orders or state courts since federal law overrides state law.

For a biological parent, the key fact is where did the child spend more than half the nights of the year?  If the child spent more than half the nights of the year in your home (or half the days if you work nights) then you are the only person with the automatic right to claim the child as a dependent.  You don't have to prove how much support you provided, and you don't have to worry about custody orders or other people who have or had parental rights.  (For temporary absences like summer camp or trip to grandma's house, the child is credited with living with you if they would have been living with you except for the temporary absence.)

However, a foster parent (as long as the child was placed by the court or other state-approved process) has the same rights as a biological parent.  If your child was in foster home, then both parents need to count the number of nights where the child physically lived -- whoever has more than half the nights (183 or more) claims the child.  End of debate.

Other individuals who might have custody (other family members, for example) may or may not have the same rights as a biological parent depending on how closely related they are.   You would have to provide more information or read publication 501.  

But in short, if you are asking about the upcoming 2025 tax return, the key question is whether or not your child lived under the same roof as you for 183 or more nights in 2025. 

[AmeliesUncle · Accepted solution]

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@CuriousK wrote:

 A judge ordered she live with me full-time at the beginningof the year. 

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As in January 1st, or after January 1st?

It sounds like your parental rights were terminated, so in the view of the law, unfortunately your child isn't considered your child.  Does that sound right?

If the law does not consider her your child, you can't claim her based on the rules for a "Qualifying Child", but you would look at the rules for a "Qualifying Relative" (which does not actually have to be related).

One of the rules for a "Qualifying Relative" is that a non-relative (in your case, legally not your child) must live with you ALL year, which is why I asked about January 1st.

*IF* she is NOT considered your Qualifying Child [because the law does not view her as related to you] but *IS* considered as your Qualifying Relative [which includes non-related people, but need to live with you ALL year], you can claim her as a dependent, BUT only qualify for the $500 credit.  On step 3 of the W-4, you would enter her as an "other dependent" for the $500.

EDIT:  As soon as I posted this answer, I realized you said you had "legal custody".  That might change the rules, and as Opus said, you might be considered in the same category as a Foster Parent, in which case his answer may be correct.

[AmeliesUncle]

See my "Edit" in my original post, which could be important.

[Daniel233]

Since your child lives with you full-time and you cover all major expenses, you’re generally the one eligible to claim her as a dependent. However, because her adoptive parents still have legal rights, consult a tax professional or IRS Publication 501 to confirm based on custody and support rules before filing.

[Olivia342]

That’s definitely a complex situation, and it’s great you’re being careful. Generally, the person who provides more than half of the child’s support and with whom the child lives most of the year is the one eligible to claim them as a dependent. However, since legal custody and adoption rights are involved, it’s best to get written clarification from the court order or consult a tax professional or family law attorney before filing—just to ensure everything aligns with both IRS rules and your custody agreement.

[Opus 17]

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@Olivia342 wrote:

That’s definitely a complex situation, and it’s great you’re being careful. Generally, the person who provides more than half of the child’s support and with whom the child lives most of the year is the one eligible to claim them as a dependent. However, since legal custody and adoption rights are involved, it’s best to get written clarification from the court order or consult a tax professional or family law attorney before filing—just to ensure everything aligns with both IRS rules and your custody agreement.

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I'm sorry Olivia, but this is wrong on multiple points.  The statement that "the person who provides more than half of the child’s support and with whom the child lives most of the year is the one eligible to claim them as a dependent" mixes up two different rules, and the "lives more than half the year with" only applies to certain blood relatives and legally appointed foster parents, not other persons.  And the IRS will not accept clarification from a state court -- the IRS follows federal tax law, and the Supremacy Clause means the IRS can ignore any state court ruling, custody order, or clarification.   A consultation with an attorney who understands federal tax law may be helpful, but the rest of your answer does not apply.  

[Opus 17]

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@AmeliesUncle wrote:

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@CuriousK wrote:

 A judge ordered she live with me full-time at the beginningof the year. 

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As in January 1st, or after January 1st?

It sounds like your parental rights were terminated, so in the view of the law, unfortunately your child isn't considered your child.  Does that sound right?

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I am not aware that a state court order terminating parental rights has any effect on the determination of qualifying child dependent under federal law.  I would appreciate references if you have them.  

A fast search found this case, which the web site has titled "Parents Whose Rights Were Terminated Denied Dependency Deductions."  However, the decision in the case does not follow the headline.  The children in that case lived with their aunt for all of 2015 (the year in question). The tax court specifically wrote "We need not determine, however, whether they could be qualifying children or qualifying relatives under section 152(a) by parsing the complicated definitions in section 152. Petitioners conceded in their pretrial memorandum that the children “were placed with * * * [their aunt] in 2014 and have lived with her since.”   In other words, the children were disqualified by normal operation of the usual rules, so the court did not even have to consider the effect of the termination of parental rights.

https://www.taxnotes.com/research/federal/court-documents/court-opinions-and-orders/parents-whose-ri...

I am curious if you know of other cases. 

[AmeliesUncle]

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@Opus 17 wrote:

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I am not aware that a state court order terminating parental rights has any effect on the determination of qualifying child dependent under federal law.  I would appreciate references if you have them.  

I am curious if you know of other cases. 

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I don't have any citations.  However, Federal VERY often starts off with how State law treats things.  For example, marriages and divorces are a state thing.  Birth certificates, driver's licenses, etc. are a state thing.   How a title is held and Community property is a state thing.   For MANY things, federal starts with how State law treats it. 

I could be wrong, but I can't think of why federal wouldn't follow the state treatment in this circumstance.