Never-married parents living *together* with a single child. Can the custodial parent allow the other parent to claim the child as a dependent?

[Taxatron]

The 1040 filing instructions say this, in part:

<begin excerpt>

     "A child will be treated as the qualifying child or qualifying relative of his or her noncustodial parent (defined later) if all of the following conditions apply:

     1. The parents are divorced, legally separated, separated under a written separation agreement, or lived apart at all times during the last 6 months of 2016 (whether or not they are or were married)."

</end excerpt>

The wording of this requirement (1) is vague, as it seems to allow for a written "separation" agreement to be in place where the parents can still live together. Is this correct? A separation agreement with the parents still living together appears to allow the custodial parent to allow the noncustodial parent to claim the dependent, all while both parents still live together in the same household. Is this correct, or does "separated under a written separation agreement" imply that the parents must have once been married, and are no longer living together?

The specific filing scenario is as follows:

     Parent 1: HoH, not claiming child, child listed as lived with whole year 

     Parent 2: Single, claiming child, child listed as lived with whole year
   

[DianeW]

The IRS uses "Tie-Breaker rules" for this purpose (when both parents live together with the child). Your scenarios will not be allowed, however you can make the choice yourselves based on the information below.  You should try it on each return to see the maximum benefit, then decide who will claim the child.

If you are married you would file together and claim your child.

If you and the other parent live together then your child becomes the qualifying child of more than one person. Only one person can actually treat the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). The other parent would not list the child on the return at all.

• 1. The exemption for the child. 
• 2. The child tax credit. 
• 3. Head of household filing status. 
• 4. The credit for child and dependent care expenses. 
• 5. The exclusion from income for dependent care benefits. 
• 6. The earned income credit.

You can make an agreement that only one of you claims the child or under the Tie-Breaker Rules the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. 

• Tie Breaker Rules

If you do not live in the same household as the other parent, you are entitled to claim your child as a qualifying child if you meet the rules noted on the attachment . If you live with someone else, such as your parents you may allow them to claim your child if you are not the qualifying child of your parents. 

[Taxatron]

Thanks TurboTaxDianeW. However, IRS Publication 501 calls out that the noncustodial parent may claim the child (even if the parents live together) if the parents "are separated under a written separation agreement". I need help understanding this. Here is the excerpt - see 1b:

<begin excerpt>

Children of divorced or separated parents (or parents who live apart). In most cases, because of the residency test, a child of di­vorced or separated parents is the qualifying child of the custodial parent. However, the child will be treated as the qualifying child of the non­ custodial parent if all four of the following state­ments are true.

1. The parents:
a. Are divorced or legally separated un­der a decree of divorce or separate maintenance,
b. Are separated under a written separa­tion agreement, or
c. Lived apart at all times during the last 6 months of the year, whether or not they are or were married.

</end excerpt>

What does "separated" mean in 1b above? Do never-married parents qualify as separated?

[DianeW]

You are both custodial parents under the tax law because you all live together so this does not apply.
1b applies to married individuals.

[Taxatron]

Thanks, TurboTaxDianeW. Is there documentation that explicitly defines "separated?" Is the tax law you mention above something other than - or in addition to - the 1040 instructions and IRS Publication 501? Where can I prove this to myself?

The IRS wording I have found thus far is vague to say the least. From where do you derive your certainty on this topic?

[DianeW]

This is under the Qualifying Child Rules when a child is a qualifying child of more than one person:  <a rel="nofollow" target="_blank" href="https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/qualifying-child-of-more...>