A custodial parent is the parent with whom a child primarily lives. A non-custodial parent is the parent who does not have primary custody of the child.
The custodial parent typically has the right to claim the child as a dependent on their tax return, and as such may be eligible for certain tax benefits such as the child tax credit and the dependency exemption. The non-custodial parent may be required to provide financial support for the child, but they do not typically have the right to claim the child as a dependent on their taxes. However, a non-custodial parent can claim the child as a dependent if the custodial parent signs a form 8332 or similar statement release their claim to the dependent.
It’s also worth noting that the non-custodial parent may be required to make child support payments to the custodial parent, and these payments are generally not tax-deductible for the non-custodial parent. On the other hand, child support payments are not considered income for the custodial parent, so they are not taxed.
Another thing to consider is the Head of Household filing status, which can provide some tax benefits for the custodial parent if they meet certain criteria such as paying for more than half of the household expenses and having a dependent living with them for more than half the year.
It is possible to file as a Head of Household (HoH) even if you do not have a dependent claimed on your tax return. Eligibility for HoH status is determined by your custody agreement and the requirements that you maintain the household in which the child lives, are unmarried or separated from your spouse for over six months, have your own home that is the main residence of the dependent, support more than half of the household, and are a U.S. citizen or resident alien. Additionally, you may qualify for other tax credits such as Child and Dependent Care Credit, Earned Income Credit, and others. The noncustodial parent may claim the child as a dependent if the custodial parent releases the claim and may also claim the child tax credit if eligible.
The Earned Income Credit, Child and Dependent Care Credit, and Head of Household filing status can only be claimed by the custodial parent, who the child lived with for more than half the year. However, a non-custodial parent can claim the child as a dependent if the custodial parent has signed a Form 8332 or a similar statement. If the non-custodial parent is able to claim the child as a dependent, they will also be eligible for the dependent exemption and Child Tax Credit.
The Earned Income Tax Credit (EITC) is a federal tax credit that is designed to help low- to moderate-income taxpayers. The credit can be significant, and can result in a refund even if the taxpayer has no tax liability.
The EITC is based on a person’s earned income and the number of qualifying children they have. In general, the more earned income and the more children a person has, the larger the credit will be. As a custodial parent, if you have qualifying children and meet the EITC income and other requirements, you can claim the credit on your tax return.
It’s worth noting that the EITC is a refundable credit, meaning that if the credit is larger than the tax liability, the taxpayer will receive the difference as a refund. This can be particularly beneficial for low-income taxpayers, and can help to offset the burden of child-related expenses.
The Child Tax Credit (CTC) is a federal tax credit that is available to taxpayers who have dependent children under the age of 17. The credit is worth up to $2,000 per qualifying child, and up to $1,500 of it can be refundable.
To be eligible for the CTC, a child must meet certain criteria, such as being a U.S. citizen, living with you for more than half the year, and being claimed as a dependent on your tax return. The credit starts to phase out at higher income levels.
As a custodial parent, you are typically the one who claims the child as a dependent on your tax return and thus eligible to claim the CTC, but the non-custodial parent can also claim the credit if the custodial parent signs a form 8332 or similar statement release their claim to the dependent.
There is another tax benefit called the Child and Dependent Care Credit which can be claimed by the custodial parent for expenses incurred for the care of the child while the parent is working or looking for work.