Ironing out tax deductions in a divorce agreement
As divorcing Wisconsin parents may know, making sure children feel secure and maintain a relationship with both parents is an important consideration. Sometimes, parents forget they will once again be paying taxes as a person who is single. Deciding which parent takes deductions for the dependent children may be decided before the divorce decree is finalized. Becoming acquainted with what the deductions are is important.
Child custody usually places the child in one household with visitation, or the parents may share physical custody equally. If one parent holds primary custody, that parent is the head of the household. However, it is possible for the custodial parent to allow the non-custodial parent to claim a child for tax purposes, and a waiver is used to accomplish this. In the latter case, the child’s time may be divided equally for six months with each parent. Parents cannot each share head of the household status for the purpose of dependent child tax deductions.
Deciding which parent claims a child as a tax dependent may set the stage for additional deductions. This may be worked out in the divorce agreement. Some parents alternate years by taking the $3,950 deduction per child or work out another plan. The IRS has its own requirements for claiming a dependent, and checking with an accountant may be a good idea.
Other credits are now possible. A single parent who earns up to $75,000 in adjusted gross income may take a $1,000 tax deduction per dependent child. If the parent uses childcare, he or she may deduct a certain amount.
