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Typically, if you have a child dependent but that child does not qualify you for HOH or the Earned Income Credit (EIC), it is due to not being the custodial parent. If that is the case edit the dependent information and select "No" the dependent did not live with you all year. Then select 5 months or less for the time with you. You can still claim the child as a dependent for the Child Tax Credit/Additional Child Tax Credit under an agreement with the child's other parent. You would need to answer the follow on questions for the form 8332 to make that claim.
If you are the custodial parent (child lived with you the most nights during the year) then you would in fact select 7 months or higher and you would be eligible for the HOH status and EIC. If you are relinquishing you right to claim the child as your dependent under an agreement you would indicate that. That removes the Child Tax Credit/Additional Child Tax Credit from your return but not the EIC or HOH status.
Why do you "need" to remove it?
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.
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