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What divorced parents should know about IRS Form 8332

If you are a divorced parent, your life will likely forever be intertwined in some ways with your ex-spouse's. In some cases, so will your taxes.

While your children are still minors, one of you will claim them each year as dependents on your tax return. Beginning with the current tax year (2018), you can no longer get exemption deductions. However, there are still significant tax advantages to being able to claim children as dependents. You may still be able to get tax credits for your dependent children.

If you have physical custody of your children for more than 50 percent of the tax year, regardless of what your custody agreement says, you can claim your children as dependents on your taxes. However, in some cases, parents who don't qualify to claim their children as dependents may want to do so because their financial situation may allow them to benefit more than the other parent would. If they share that benefit with their co-parent and children, it could be advantageous for everyone.

If the true custodial parent agrees to that arrangement, he or she needs to complete and sign IRS Form 8332 and give it to the other parent. The form is called the "Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent."

This is a fairly simple form to complete. You designate whether you're releasing the claim for the current tax year only or multiple years. The parent claiming the children as dependents includes the form with his or her taxes.

A non-custodial parent is eligible to file Form 8332 as long as the children live with one or the other of the parents for more than 50 percent of the year. Further, the two parents must together pay for more than half of the child's living expenses.

Custodial parents can take their claim of dependency back by completing the third portion of the form. You can reclaim the dependency for a specific tax year or multiple years. However, the reclamation won't take effect until the next tax year, regardless of when you submit it.

If you and your co-parent are considering using this form, it's essential to discuss the pros and cons with your tax advisor. It's also wise to let your Arizona family law attorney know about your intentions in case it could cause any issues with your divorce or custody agreement.

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