Divorce and Taxes: Can You Benefit From The Dependent Tax Exemption?

Tax time is upon us once again. For divorced or single parents, this time of year is often made more stressful due to uncertainty regarding tax exemptions and whether one parent can or should claim the child or children this year (in many cases, Courts order parents to alternate the years that they can claim the tax dependency exemption for each child). Your Dayton family lawyer> can help you navigate through these challenges, and can often offer practical solutions that may not have been considered.

For example, in cases where one parent earns a low income, that parent may simply get no benefit from claiming the tax exemption. This is because parents, who are also allowed to exempt income based on their filing status as either married or head of household, as well as for themselves and a spouse (if applicable), must have income in excess of the sum of those other exemption amounts to also benefit from the dependent exemption. For example, in 2012, married couples can exempt $19,500 from taxation as a result of their own personal exemption (2 x $3,800) and the standard deduction ($11,900); single parents can exempt $12,500 before accounting for the dependent exemption ($3,800 + $8,700). Families with incomes below these threshold amounts receive no benefit from the dependent exemption because their total taxable income can be reduced to zero without applying the dependent exemption for any children in the household (the benefit from the dependent exemption cannot exceed tax liability). In cases where no benefit can be derived from the dependent exemption, it may be advisable to allow the parent who can take advantage of the exemption, to do so, especially if there is something offered in return. Dependency exemptions are not related to the child care tax credit or earned income credit. Therefore, even if the custodial parent choses to allow the other parent to claim the child for the dependency tax exemption, he or she could still use the child care credit and earned income credit. As with all tax issues, please consult a tax professional for advice regarding your specific situation, and for guidance on how to file your taxes (for example, it is important to file IRS Form 8332 (http://www.irs.gov/pub/irs-pdf/f8332.pdf) should the custodial parent opt to allow the other parent to use the dependency exemption).

For more information about Ohio divorce, and/or to schedule a consultation please contact your Dayton divorce law firm at Helen Wallace, Attorney at Law today by clicking on the preceding link, by e-mail to hw@helenwallacelaw.com or by telephone to (937) 654-6800.

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