Unmarried but sharing custody 50/50

[meflow]

Co-parenting with an unmarried partner. Assets and finances are kept entirely separate. File separately. Share custody 50/50 therefore no child support. No one parent is paying more for dependent.

What is the best tax strategy for both of us to benefit if this continues for 17 more years?

Thanks!

[xmasbaby0]

There is an important piece of information missing.   Are all of you living together as a family?   Or are the parents living apart?   If you live apart, count up how many nights the child spent with each parent.   The custodial parent is the one with whom the child spent the most nights.   We can be more helpful if you explain your living situation.

[EricE_CPA]

@meflow  very good question.

You have options here.

You can choose to alternate years you each will be claiming dependent.

Example:

one parent can claim the child or children in odd years, and the other parent can claim the child or children in even years

Another example:

The custodial parent can still qualify for head of household filing status even though for that year, the noncustodial parent is claiming the child, if you meet the following requirements:

1. You're not married, or you’re considered unmarried on the last day of the year.
2. You paid more than half of the cost of keeping up a home, that was your home and the main home of your child for more than one-half of the year.
3. Your child is your qualifying child for purposes other than the dependency exemption and the child tax credit.  

So again, each year you can consider which would be more beneficial as to who claims the child for that year.

I hope this helps

[Laura_CPA]

Hello Meflow, 

Happy to assist with your question. Based on the information provided, if there isn't a court ordered agreement in place, then I would say that 50/50 would be logical to follow. What does that mean? You can alternate claiming him one year and then your unmarried partner would claim him the following year. Please see What Happens When Both Parents Claim a Child on a Tax Return? 

However, each state might have a different approach. For example, in California, the law states that in split of 50/50 child custody agreements, the parent with the higher income can claim the child as a dependent on taxes. 

In which state are you locate? 

Cheers,

Laura_CPA

[meflow]

For tax purposes we live separately. Thanks

[meflow]

Thanks so it sounds like there must be a determination of the custodial parent. Both of us would likely want to claim this as we both keep homes that are considered livable for our child 100% of the time. 

Alternating years seems the most fair given the circumstances.  

[meflow]

Located in CA. Thanks for choosing that one as the example. 

[Laura_CPA]

@meflow glad it helped you. 

[Laura_CPA]

@meflow definitely the best way to go. If you found my answer helpful, please mark it as best answer. 

Have a great day!

Cheers,

Laura_CPA

[KNDavis]

There are several factors to consider in your situation, including who will claim the child,  what filing status will each of you use, and who will claim the Child Tax Credit and any Dependent Care Credits?

First, let's review the rules for claiming a child on a tax return:

• The child must be a U.S. citizen, U.S. national or U.S. resident alien.
• Relationship test - you both qualify since it is your child.
• Residency test - in most instances, the parent who has custody of the child for more than half the year will claim the child.  However, the custodial parent can release the Claim to Exemption with Form 8332.
• Age test - the dependent child must be under age 19, or under age 24 if a student.
• The child can't support himself/herself.

Both you and the other parent can qualify to claim your child as a dependent.  Many people in your situation decide between themselves who will claim the child on their taxes or alternate tax years (e.g., father takes even years and mother takes odd years).  Whoever claims the child is entitled to the Child Tax Credit for that year.

Regarding filing status, the custodial parent can file with the status Head of Household (HOH) and the other will file single (assuming you are both unmarried).  In order to qualify for HOH status, you must be unmarried, pay over half the cost of keeping up the home where the child lives, and the child must have lived with that parent for over half the year.  One day more is all it takes.  Head of Household status provides a larger standard deduction.

The parent that had custody of the child for more than half the year can claim the dependent care credit for any child care expenses incurred, even if the other parent claims the child a dependent for that year.

Other considerations are whether one parent earns substantially more than the other. You can choose which parent claims the child as a dependent , but the parent who has the child for more than half the year gets the HOH status.  

IRS Publication 501 provides more information.  Here's a link:

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

I hope you find this information helpful!

[SuziM]

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