Tax Exemptions

One of the more contentious debates between parents is often who will claim the dependent child tax exemption(s). Sometimes accountants will advise a parent that he or she is eligible to take the exemption according to the Tax Code but fail to consider whether a court order has divided the exemption. The court has wide discretion to decide who gets the exemption. Usually, if incomes are close, the exemption(s) are alternated so they are shared evenly, but courts often consider the other financial arrangements between the parents when making this decision and the court is not required to divide the exemption(s) evenly. If you believe the other parent is going to be uncooperative in reimbursing you for extraordinary expenses, or will be late in making a transfer payment, it might be wise to condition the right to claim the exemption on all payments being current. Also, it often beneficial to both parents to give the higher income parent the right to purchase the tax exemption from the other parent.