WN Law PLLC

How child custody will affect taxes

One thing that parents in Michigan should keep in mind as they are negotiating child custody agreements is how their custody arrangement will affect taxes. One of the issues is who will be as head of household.

This may be more complex than it initially appears. The divorce must be finalized by the end of the year for either parent to qualify. The child must be living with the parent more than half the time. Technically, the parent who claims head of household may also need to be covering more than half of the household expenses. If there are two children and parents share custody, each parent can have one child for one day longer than half the time, and this allows both parents to claim head of household. Parents who only have one child may alternate who the child spends the most time with and who can take the deduction.

The Tax Cuts and Jobs Act eliminated the dependency exemption, but a parent may claim the child tax credit. As is the case with the head of household, this can be alternated. It can also be split if there is more than one child. If one parent pays a significant amount of support but is not the custodial parent, the custodial parent could sign a form that allows that parent to take the child tax credit.

While parents should keep all of this in mind as they are negotiating an agreement for child custody, they should primarily focus on the arrangement that is in the best interests of the child. Divorce can be hard for children, but a custody agreement that causes the least disruption to the child's life may help everyone adjust. Older children may also have some say in the arrangement. When making the custody agreement, parents should remember to include plans for holidays and vacations.

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WN Law PLLC
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Grand Rapids, MI 49503

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