How Do Minnesota Parents Split the Tax Dependent Exemptions in a Minnesota Divorce?

Communication-theatreThe process of mediation doesn’t have to be confined to the big picture in a divorce or after a divorce.   Parties can attempt to resolve any dispute through mediation.   The who, why and how of sharing the tax dependency exemptions and related tax benefits for the children is a subject well suited for a family law mediation. An allocation of the dependent exemption should ultimately benefit the family including both parents who share parenting time.

The following tax benefits should be considered in any mediation on this issue:

  1. Allocation of the dependent tax exemption in the divorce;
  2. Head of household claim and availability to either parent in the divorce;
  3. Dependent care credit;  earned income credit;  the child tax credit and the implication of any income limits on the forgoing to either parent in the divorce.

An understanding of the general rules for allocation of the dependent exemptions and related benefits is necessary to make an informed decision. Both parties should prepare detailed expense and income reports as well as evidence of income.  A pre-mediation meeting with a tax accountant would help as well. The dependent exemption analysis can become fairly complex given the IRS rules and exceptions.

In short, the parent who has the children the majority of overnights ( not necessarily the custody award)  is entitled to claim the child as a dependent exemption. if the parties share equal joint parenting time, then IRS policy says the parent with the higher adjusted gross income claims the dependent exemption.  Head of household goes to the parent who has more than 50% overnights and pays at least half of the dependent’s living expenses.  Note that the IRS limits the application of certain credits and exemptions based upon income.

The IRS sets the rules and policies,  but Minnesota Courts have the discretion to allocate the dependent exemptions under Minn. Stat. Section 518A.38, which is a new statute.   If a Minnesota Court allocates the exemption, then that Order is controlling.  The Order should be very specific in language as to the who, what, and when of the allocation. Any settlement document should also be very specific in its language.  The IRS now allows pages of a Court order to be attached to a tax return in place of Form 8352, but the language in the Court Order must contain exactly what the IRS requires.

For more information see: IRS Publication 504 Divorced or Separated Individuals  and Minn. Stat. Section 518A.38

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Kate Willmore, Saint Cloud, Minnesota, Divorce, Father’s Rights, Mother’s Rights, Family Lawyer, Family Court Lawyer and Mediation Coach

Call me at (320) 492-3606 or e-mail me.

Copyright 2015

About Kate Willmore, Esq.

Kate Willmore, Saint Cloud, Minnesota, divorce, custody and family attorney brings over 25 years experience to every client's legal matter. *** Licensed in Minnesota and in California

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