Edited 2/3/17
You need income to benefit from claiming a dependency exemption for a child. This being said, if you are not the custodial parent, (the parent the child lives with over half the tax year), you may not claim the Head of Household filing status or the Earned Income Credit.
Between the two of you, you may decide who claims the children as dependents. There are also special rules for divorced or separated parents. If you can't decide, the tiebreaker rules come into play. See below.
Sometimes a child
meets the tests to be a qualifying child of more than one person. However, only
one of these persons can actually treat the child as a qualifying child. Only
that person can use the child as a qualifying child to take all of the following
tax benefits (provided the person is eligible for each benefit).
- The exemption for the child.
- The child tax credit.
- Head of household filing status.
- The credit for child and dependent care expenses.
- The exclusion for dependent care benefits.
- The EIC.
From <https://www.irs.gov/publications/p596/ch02.html>
Special rules apply for children of
divorced or separated parents. For
information for divorced and separated parents, see Publication 501
Tiebreaker
rules. To
determine which person can treat the child as a qualifying child to claim the
six tax benefits just listed, the following tiebreaker rules apply.
- If only one of the persons is the child's parent, the
child is treated as the qualifying child of the parent.
- If the parents file a joint return together and can claim
the child as a qualifying child, the child is treated as the qualifying
child of the parents.
- If the parents don't file a joint return together but both parents
claim the child as a qualifying child, 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.
- If no parent can claim the child as a qualifying child, the child is
treated as the qualifying child of the person who had the highest AGI for the year.
- If a parent can claim the child as a qualifying child but no
parent does so
claim the child, the child is treated as the qualifying child of the person who
had the highest AGI
for the year, but only if that person's AGI is higher than the highest
AGI of any of the child's parents who can claim the child. If the child's parents file
a joint return with each other, this rule can be applied by treating
the parents' total AGI as divided evenly between them.
