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Child Custody Agreement and Taxes |
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by: Jean
Mahserjian |
A child custody
agreement can have serious implications on your tax filing and your
taxes overall. This issue should be addressed with your attorney or
with your accountant while you are going through the process of
negotiating or litigating child custody or a divorce agreement.
Waiting until after you have finalized a child custody agreement to
investigate the tax impact is not adviseable.
State law on
child custody does not dictate who gets the tax deductions. If your
child custody agreement is entirely silent on this issue, the parent
with primary residential or sole custody will have all of the tax
benefits available through the children. That party will be able to
claim the children as deductions, and so forth. This can be a
significant issue. There are parents who simply assume that if they
are paying thousands of dollars per year in support, they will be
able to take the children as deductions. Not so. This is incredibly
important when you consider that all child support payments are not
tax deductible to the payor and they are not taxable to the
recipient parent.
Thus, when negotiating your child cusody
agreement, you must address the issue of how custody will be
structured and who will recieve the tax benefits. This negotiation
should be a part of an overall financial scheme that encompasses a
consideration of all issues, including child custody, child support,
property, alimony, and tax impact.
The ability to claim head
of household instead of married filing separate or even filing
single can be incredibly important to your overall tax scheme. You
can claim head of household if you have your children for more than
50% of the time. Thus, a head of household tax filing should be a
part of the overall negiating outline in a divorce or separation
situation. A child custody agreement that is silent on this issue is
really not a well negotiated or written agreement.
Your
child custody agreement can address this issue in a number of ways.
If your child custody agreement provides for joint shared custody,
it must state who has the children for 50% of the time. If you have
two children, you can divide that up so that each parent has the
possibility of fiing for head of household. If you simply have joint
custody and one parent has residential custody, you can still
provide a head of household deduction to the other parent by wording
the agreement in a way that allows for that filing.
There
are other tax benefits available to parents that have to be
considered when negotiating a child custody agreement. Many or most
of those tax benefits are variable depending upon your income level
ad whether or not you can claim the child or children as deductions.
If you are really thinking through your child custody agreement, you
will negotiate all of these benefits. The objective should be to
maximize all available benefits for both parties, thereby providing
an overall highly advantageous tax impact for your child custody
agreement.
About the author:
Jean Mahserjian is an
attorney and the author of numerous websites and books devoted to
helping consumers through the process of divorce. To download free
excerpts from her divorce and custody books, visit: http://www.millenniumdivorce.com/
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