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Post-divorce taxes and dependents

Parents in Minnesota may already realize the significant financial benefits of claiming children as dependents on tax returns. In addition to being able to file as Head of Household, parents who claim their kids as dependents may also claim credits such as the Earned Income Tax Credit, Child Tax Credit and Child and Dependent Care Tax Credit.

Even though the passage of the Tax Cuts and Jobs Act resulted in the elimination of the personal exemption, parents are still able to claim the Dependent Care Credit. The legislation also retained the Child Tax Credit, doubling it to $2,000.

In situations in which the parents are divorced or separated, both exes may want to take advantage of the tax benefits. However, complications can arise if multiple taxpayers are using the same dependents on their tax returns.

The Internal Revenue Service uses certain rules to determine whose claim should be allowed in cases when multiple taxpayers are using the same dependents and there are no other legal agreements. The rules that are used to make these decisions examine multiple factors.

For example, the taxpayer's relationship with the dependent will be considered first. The claims of parents will be prioritized over those of the non-parents. If two biological parents have a dispute, the claim will be awarded to the parent who has more custodial time with the dependent.

With help from an attorney, a soon-to-be ex-spouse could obtain favorable settlement terms. The attorney may even negotiate to obtain terms that allow the client to claim the kids as dependents on tax returns.

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