If married filing separately, do we both claim children as dependents?

[hillary_bracken]

My husband and I are married filing separately.  My husband has two children from a previous marriage who live with us for 50% of the year.  He has shared custody with the children with his ex-wife. Should both my husband and I claim the children as dependents on our tax returns? According to the custody agreement, each parent has agreed to claim one child on their tax return.  Also, my AGI is greater than my husbands and I pay a majority of all household expenses.

[MartinW · Accepted solution]

Hi Hillary,

A dependent may only be claimed once per year.

Either you or your husband may claim the child on your tax return. Both of you cannot claim the same child.

Most married taxpayers are better off filing jointly compared with filing separately.

If you are filing separately, please consider using the Desktop version of TurboTax. It allows you to e-file up to 5 tax returns, while TurboTax Online will charge you for each return.

https://turbotax.intuit.com/personal-taxes/?view=desktop

I hope this resolves your question. If you need further help with this issue, please respond to this post.

Thank you for choosing TurboTax!

[chrissakwitz]

So if one spouse doesn't file taxes and the other does (married filing separately), can the one filing the taxes claim the children as dependents even if that spouse doesn't pay more than half of the household expenses?

[MarilynG1]

@chrissakwitz Here are the rules for Claiming a Dependent.

• They're related to you.
• They aren't claimed as a dependent by someone else.
• They're a U.S. citizen, resident alien, national, or a Canadian or Mexican resident.
• They aren’t filing a joint return with their spouse.
• They're under the age of 19 (or 24 for full-time students).
  • No age limit for permanently and totally disabled children.
• They lived with you for more than half the year (exceptions apply).
• They didn't provide more than half of their own support for the year.

The 'providing over half of household expenses' applied to filing as Head of Household. 

[chrissakwitz]

Thanks, Marilyn!  That's very helpful.

[macuser_22]

But why fie separate?

If you file MFS (Married Filing Separately) keep in mind that there are several limitations to MFS.  Married filing Jointly is usually the better way to file.
 
A few of those limitations are: (see IRS Pub 17 for the full list

https://www.irs.gov/pub/irs-pdf/p17.pdf page 21

1. Your tax rate generally is higher than on a joint return.
2. Your exemption amount for figuring the alternative minimum tax is half that allowed on a joint return.
3. You cannot take the credit for child and dependent care expenses in most cases, and the amount you can exclude from income under an employer's dependent care assistance you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. For more information about these expenses, the credit, and the exclusion, see chapter 32.
4. You cannot take the earned income credit.
5. You cannot take the exclusion or credit for adoption expenses in most cases.
6. You cannot take the education credits (the American opportunity credit and lifetime learning credit) or the deduction for student loan interest.
7. You cannot exclude any interest income from qualified U.S. savings bonds you used for higher education expenses.
8. If you lived with your spouse at any time during the tax year:
a. You cannot claim the credit for the elderly or the disabled, and
b. You must include in income a greater percentage (up to 85%) of any social security or equivalent railroad retirement benefits you received.
9. The following credits and deductions are reduced at income levels half those for a joint return:
a. The child tax credit,
b. The retirement savings contributions credit,
10. Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return).
11. If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.

- If you live in a community property state you must allocate community income between both spouses..
-
- Community property states.   If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin and file separately, your income may be considered separate income or community income for income tax purposes. See Publication 555. http://www.irs.gov/publications/p555/index.html

 
See this TurboTax article for help with this.
https://ttlc.intuit.com/questions/1894449-married-filing-jointly-vs-married-filing-separately

https://ttlc.intuit.com/questions/1901162-married-filing-separately-in-community-property-states