Release of Claim to Exemption for Child of Never Married Parents Who Do Not Live Together

[tomandjerry1]

TurboTax explains the use of Form 8332 to allocate the exemption for child of divorced or separated parents.  But what, if any, form should be used for the case of the child of parents who are not married and don't live together and have not created any kind of formalized custody agreement? This particular situation exists for my unmarried daughter who gave birth in 2023 and with whom the infant has been living full time.  What is the significance of answering "No, I don't have a custody agreement"?  Should my daughter ask her daughter's father for a custody agreement?

[Bsch4477]

She can answer no to the custody agreement without endangering her claiming the child. 

[tomandjerry1]

Thanks.  One of the TTax help pop-ups discusses the situation of unmarried parents who are living together.  In this case TTax says "If you're living with the other parent and aren't married and don't have an agreement,
the parent who has the highest adjusted income for the year has the right to claim the child on their tax return. " I'm somewhat unclear regarding what "has the right" means.  In my daughter's case they are not living together and don't have any sort of formal agreement regarding custody, or support for that matter.  It is the case that my daughter provides virtually all the financial support for this new child.  My daughter works and has independent health insurance, etc.   The TTax help in this case seems to assume that the parent with the highest adjusted income would benefit most from the dependent deduction -- but this also seems to assume that that parent would also be contributing significantly to the household where the new dependent actually lives.  It's also the case that (1) both my daughter and her baby's father have other dependent children from prior marriages (so both have filed as heads of households and have custody agreements with their respective ex-spouses_) and (2) reside in different states.  My daughter plans on claiming the new child as a dependent.

[Opus 17]

You need to look at the "special rules for children of divorced or separated parents" in publication 501.

Briefly, only the parent where the child lives more than half the nights of the year (or half the time since birth for a newborn) has the automatic right to claim a child as a dependent.  Your daughter does not need a form 8332 from the father to claim her child as a dependent, because you say the child lives with your daughter for most of the time.  The father would need a form 8332 from your daughter if the father wanted to claim the child.  Your daughter is not obligated to give up her claim unless a court orders her to do so.  

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

[Hal_Al]

You are reading too much into this.  It's much more simple. Since the child lives with the mother, only the mother can claim the child.  She does need a form from the father nor does she need to have any kind of custody agreement or any other paper work from the father.

It's only when the mother wants to let the father claim the child that form 8332 is required, from her to him. 

The custodial parent has first priority on claiming the children on her taxes; regardless of the amount of support provided by the non-custodial parent. The IRS goes by physical custody, not legal custody. The non-custodial parent can only claim the child as a dependent if the custodial parent gives permission (on form 8332). 

[Hal_Al]

There is a way to split the tax benefits. For future negotiations with the other parent (and maybe even for this year) the following info may be of use:

 There is a special rule in the case of divorced & separated (including never married) parents. When the non-custodial parent is claiming the child as a dependent/exemption/child tax credit; the custodial parent is still allowed to claim the same child for Earned Income Credit, Head of Household filing status, and day care credit. This "splitting of the child" is not available to parents who lived together at any time during the last 6 months of the year; then only one of you can claim the child for any tax reasons. The tax benefits may not be split in any other manner.

Note in particular that the non-custodial parent can never claim the Earned Income Credit, Head of Household filing status or the day care credit, based on that child, even when the custodial parent has released the dependency to him (on form 8332).

 So, it's good idea to let the other parent know that you will be claiming those items, as many first time divorced parents are not aware of this rule and may try to claim those items, which will cause the IRS to send out letters.

Ref: https://www.irs.gov/publications/p17#en_US_2017_publink1000170897

Scroll down to "Children of divorced or separated parents (or parents who live apart)"

You can if you are the custodial parent.  The custodial  parent is the parent the child lived with for more than 182 nights in the year (or the most number of nights if the child was born in 2023).

[Bsch4477]

One point that hasn’t been mentioned. I assume that your daughter is living in and maintaining her own household as opposed to living with you so that she does qualify to file as Head of household. 

[tomandjerry1]

Correct.  My daughter does not reside with me, and has an additional child (in high school)  with her former spouse.  She and her former spouse did have an agreement to claim this child on alternate years.  So she and her former spouse would file either single or head-of-household on alternate years.

[tomandjerry1]

And many thanks to all of your very helpful comments.  

[Opus 17]

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@tomandjerry1 wrote:

Correct.  My daughter does not reside with me, and has an additional child (in high school)  with her former spouse.  She and her former spouse did have an agreement to claim this child on alternate years.  So she and her former spouse would file either single or head-of-household on alternate years.

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That was actually incorrect.  If the child lived with your daughter more than half the year, then only your daughter could claim HOH status.  The other parent could get the child tax credit if your daughter gave him a signed form 8332.  But the only way he could claim HOH is if he and your daughter both pretended that the child lived more than half the year with him in those alternating years.