Recently Divorced - Head of Household?

[TryingToFigureThisOut1]

My ex-husband and I share two daughters and will transition to 50/50 custody next year. Our divorce agreement states that we each claim one child every year. Since we each claim one child, are we able to each claim HOH? Or is this strictly based on physical location? If not, is it legal to agree to alternate years each person claims HOH? It seems silly to let this tax benefit go to waste. Any insight is greatly appreciated.

Also, I'm fairly certain I'm able to claim HOH this year. I had my girls 65% of the time, but he will be claiming one as a dependent as per our divorce agreement. If anyone could give me your thoughts on that as well it would be appreciated.

Thank you.

[rjs]

You can both file as head of household if you both meet the requirements for that filing status. One of the requirements is that "a qualifying person lived with you in the home for more than half the year." That requirement is based on where the child actually lived. Your divorce agreement, or any informal agreement that you make, has nothing to do with it.

There is no such thing as 50/50 custody in tax law. Whichever parent the child lived with for more nights during the year is the custodial parent. Among the benefits of being the custodial parent is the ability to file as head of household. Since you have two children, you and your ex could arrange the children's time in your homes so that each of you is the custodial parent of one of the children. That way you could both file as head of household. That would also make it easy to satisfy the requirements of your divorce agreement to each claim one child as a dependent each year. You would each claim the child for whom you are the custodial parent. You would be advised to keep careful records of where each child slept each night. That would eliminate any disputes, and also help to convince the IRS of where each child lived, if necessary.

At some point someone is going to tell you about IRS Form 8332. That form is used to let the custodial parent allow the noncustodial parent to claim the child as a dependent. But it does not allow the noncustodial parent to file as head of household. Head of household is always based on "physical location," as you put it. If you arrange things so that each of you is the custodial parent of one child, as I suggested, you have no need for Form 8332.

[Opus 17]

HOH is strictly based on where the child lives more than half the nights of the year.  In order for both parents to claim HOH status, you have to arrange actual physical custody so that child A lives with you at least 183 nights, and child B lives with your ex at least 183 nights.  

In normal years with 365 days, more than half means 183 or more nights and less than half means 182 or fewer nights.  It only has to be 1 day different (or more), but HOH is strictly based on physical presence more than half the year.  In leap years with 366 days, more than half means 184 or more nights.  If each parent has custody exactly 183 nights of a leap year, then no parent can claim HOH because no parent had custody more than half (because exactly half is not more than half). 

Note that if you arrange actual physical custody of the children so that each parent has "more than half" physical custody of a child, then a form 8332 dependent release is not required of either parent.  If one parent has physical custody of both children for 183 or more nights, the other parent can't claim HOH, and can't claim the child as a dependent without a form 8332.

For 2021, you can claim HOH based on having custody more than half the nights of the year.  Your ex can only claim the children as dependents if you give your ex a signed form 8332 dependent release.  In that case, you will tell the tax program that you had custody but you are signing the form; you will receive HOH but not the child tax credit.  Your ex will say they had custody less than half the year but did get a form 8332; their program will give them the child tax credit but not HOH.  If your ex tries to claim the children without form 8332 by saying they lived with him more than half the year, you may not be able to e-file and both of you will get letters from the IRS investigating the situation.