California parents typically understand how important it is to respect their children’s best interests during divorce. However, these same parents often end up overlooking their own financial interests in the process. Things like child custody can significantly impact future taxes. While taxes should not be a driving force for any given custody arrangement, parents should still understand how their taxes might look.
The Tax Cuts and Jobs Act of 2017 eliminated the dependency exemption, which might lead some parents to mistakenly believe that it does not matter who ends up claiming their children. However, when claiming a dependent, a parent can also access other important benefits, such as a child tax credit as well as earned income credit. Knowing this, parents may be more eager to claim their child, but divorced parents cannot both claim their child in the same year.
After a divorce, the parent with primary physical custody typically has the legal right to claim the child as a dependent. Since claiming a dependent is not as obvious for divorced parents who share 50/50 custody, it is best to address the issue in a written agreement. This can be done during the divorce process. Parents with multiple children might agree to divide which children they claim each year. Others prefer to alternate the years in which they can claim their children as dependents.
Divorce is an emotional process just as much as it is a legal one, which can make getting the details right somewhat difficult. However, when it comes to dealing with things like child custody, taxes and other important matters, it is best to not leave things up to chance. An experienced family law attorney may be able to provide important guidance to California parents who are ready to divorce.