The Law is clear, the custodial parent is entitled to the dependency exemption and the child tax credit. The custodial parent may sign, or the court may require the custodial parent to sign IRS Form 8338. IRS Form 8338 will waive the custodial parent’s right to take the exemption so that the noncustodial parent may do so.

If there is split custody, rotating custody, or if there is no agreement which establishes who has custody, then “custody” will be deemed to be with the parent who, as between both parents, has the physical custody of the child for the greater portion of the calendar year.

If there is an exact equal timeshare between both parents, then pursuant to the “Working Families Tax Relief Act of 2004,” effective January 1, 2005, the parent who is entitled to the dependency exemption is the parent who has the highest adjustable gross income for the taxable year.

This entry was posted on Wednesday, May 23rd, 2007 at 9:26 pm and is filed under FINANCES, Tax Planning. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.