Quick overview

When parents separate or divorce, one of the most consequential tax questions is who gets to claim the children. The answer affects eligibility for the Child Tax Credit, the Earned Income Tax Credit (EITC), the Child and Dependent Care Credit, filing status (including Head of Household), and ultimately the size of any refund or tax bill. This guide explains the IRS rules, common scenarios, documentation to keep, and practical strategies to reduce conflict and audit risk.

Who the IRS treats as the “custodial” parent

The IRS uses residency, not custodial titles in court papers, to decide who claims a child. The custodial parent is the one the child lived with for the greater portion of the tax year — more than 50% of nights. That parent generally has the first right to claim the child as a dependent and to claim credits tied to the child’s residency.

Authoritative reference: See IRS Publication 501 and the Child Tax Credit and Form 8332 pages for current rules and exceptions (IRS.gov).

Form 8332: How a noncustodial parent can claim the child

A noncustodial parent may be able to claim a child if the custodial parent signs IRS Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent) or a written declaration in the divorce decree that matches the Form 8332 language. Form 8332 permits the custodial parent to release the dependency exemption (and certain credits) for one or more tax years to the noncustodial parent. The IRS form page and instructions are here: https://www.irs.gov/forms-pubs/about-form-8332.

Key point: Form 8332 does not let the noncustodial parent qualify for credits that require the child to live with the claimant (for example, EITC). The ability to claim refundable or nonrefundable portions of the Child Tax Credit may differ — check the current Child Tax Credit rules each filing season (https://www.irs.gov/credits-deductions/child-tax-credit).

Tiebreaker rules and equal-time custody

When a child spends equal time with both parents (for example, 50/50 custody measured by nights), the IRS applies tiebreaker rules:

  • If either parent is the child’s parent (not a third party), the parent with the higher adjusted gross income (AGI) generally has the right to claim the child as a dependent for tax purposes. (See IRS Pub. 501.)
  • The tiebreaker also affects who may claim Head of Household filing status if both try to claim it.

Practical tip: When custody is equal, parents can still agree to alternate years or allocate claims in another written agreement, but it’s best to document that using Form 8332 or a court order to avoid IRS conflict.

Which credits depend on residency vs. a signed release

Not all tax benefits tied to children are treated the same under IRS rules. Know the distinctions:

  • Child Tax Credit: Can be claimed by the person who claims the child as a dependent. If legal release (Form 8332) is in place, a noncustodial parent can claim the child tax credit subject to IRS rules and income limits. (IRS Child Tax Credit page.)
  • Earned Income Tax Credit (EITC): The child must live with the claiming taxpayer for more than half the year; a signed Form 8332 does not transfer EITC eligibility to a noncustodial parent. See IRS EITC guidance.
  • Child and Dependent Care Credit: Generally requires the child to be a qualifying person who lived with the claimant more than half the year and that the claimant paid qualifying work-related care expenses. (See IRS Child and Dependent Care Credit guidance.)

Source links: IRS Child Tax Credit; IRS Earned Income Tax Credit; IRS Child and Dependent Care Credit pages.

Common real-world arrangements and pitfalls

  • Alternating years: Parents often alternate claiming all children year-to-year. This is legal when both agree, but the custodial parent should sign Form 8332 for the years they release. Without documentation, both parents may file claims for the same child, triggering an IRS review.
  • Split children: Parents sometimes divide children so each parent claims certain children. That’s acceptable if each child’s residency rules are satisfied and documentation exists.
  • Informal verbal agreements: Verbal promises are risky. If a custodial parent agreed verbally to let the other parent claim the child but didn’t sign Form 8332, the IRS won’t treat the noncustodial parent as having the right to claim the child.

Case example from practice: I advised a client whose divorce settlement said she would release the claims for the next three years, but the agreement didn’t include Form 8332 language. The result: the noncustodial parent filed and the IRS rejected the claim. We solved it by filing Form 8332 and, where necessary, amending prior returns with Form 1040-X.

What if both parents claim the child?

If both parents file returns claiming the same child, the IRS will usually accept the return filed first and send a notice to the other parent asking for documentation. The IRS may apply tiebreaker rules, request proof of residency, or start an audit if there’s a pattern of duplicate claims.

If you receive a notice: respond quickly with proof of residency (school records, medical records, a custody order, or signed Form 8332). If the IRS disallows a claim, you may need to amend returns or work with the other parent to resolve the issue. In contentious cases, tax and family law attorneys can help negotiate a written resolution.

Authoritative guidance: See IRS Topic No. 503 and Publication 501 for details on how the IRS resolves conflicting claims.

Documentation to keep (and for how long)

  • A signed Form 8332 or a copy of the divorce/custody order with explicit tax-year language.
  • Proof of where the child lived: school attendance, medical visit addresses, childcare records, or a calendar of overnights.
  • Records of financial support and expenses paid for the child.
    Keep these records for at least three years after you file, longer if you file an amended return or the IRS contacts you.

State tax rules

State rules vary. Some states follow federal dependency rules; others have different definitions or credits. Check your state’s department of revenue website or consult a tax professional to understand how a custody split affects your state income tax return.

Amending returns and correcting errors

If you or your ex claimed a child improperly, it may be necessary to file Form 1040-X (amended U.S. individual income tax return) to correct who claimed the child and to claim or release credits properly. Guidance for amending returns and time limits is available at IRS.gov and through FinHelp’s guides on amending returns.

Learn more about correcting missed credits and amending returns: see our article on Amending Returns to Claim Missed Credits: Earned Income Credit and Child Tax Credit Corrections.

Negotiation and planning strategies (practical tips)

  1. Put agreements in writing. Use Form 8332 or include explicit tax-language in separation/divorce orders. Verbal agreements won’t protect you with the IRS.
  2. Track overnights. Keep a dated calendar or shared digital log (screenshots work) that records where the child spent each night.
  3. Match credits to custody realities. If you’re the custodial parent, understand that you may be giving up valuable credits if you sign a release — get something in the agreement in return (e.g., a higher child support payment).
  4. Consult a CPA or family law attorney when you draft custody agreements so tax consequences are clear.

Useful FinHelp resources

Final checklist before you file

  • Who did the child live with for >50% of nights this tax year? Document it.
  • Is there a signed Form 8332 or a court order for the year in question? Attach or retain a copy.
  • Which credits require residency vs. release? (EITC requires residency.)
  • Did both parents try to claim the child? Be prepared to respond to an IRS notice.
  • Consider professional help if the situation is contested.

Disclaimer

This article is educational and does not replace individualized tax or legal advice. Tax law and credit amounts change. For personalized guidance about your custody and tax situation, consult a qualified tax professional or family law attorney. See IRS Publication 501 and the IRS forms and credits pages for official, up-to-date rules.