The ability to of a parent to claim children on their taxes is as good as money itself. While this is usually an afterthought, should not simply abandon the right to declare their children to the other parent simply because the other parent has the children most of the time or pays more in taxes.
The rules for declaring children on taxes in Illinois are straightforward.
In Illinois, if the parties agree who will claim the children on their taxes that will be the final order.
If the parties don’t agree as to who will declare the children for tax purposes, the judge will usually order an alternating schedule for declaring the child for tax purposes so long as child support is current. If there are multiple children, then the declarations of children shall be divided (ex: he declares one child, she declares the other child).
The parent with the most parenting time can insist on all deduction per the statute.
“Unless a court has determined otherwise or the parties otherwise agree, the party with the majority of parenting time shall be deemed entitled to claim the dependency exemption for the parties’ minor child.” 750 ILCS 5/505(a)(3)(C)(I)
Unless there’s a court order, the parent with the majority of the parenting time automatically gets the deduction. So, you’re going to need to request a an order if the non-custodial parent is to claim any of the children during any of their years under age 18.
“A trial court decidedly has jurisdiction to transfer the dependent child tax exemption from the custodial to the noncustodial parent.” In re Marriage of Fowler, 197 Ill. App. 3d 95, 100 (Ill. App. Ct. 1990)
“The allocation of the tax exemption is an element of child support, subject to the trial court’s discretion. It is within the authority of the trial court to allocate the dependency tax exemption to a noncustodial spouse and to order the custodial parent to sign a declaration for Internal Revenue Service (IRS) purposes that he or she will not claim the exemption.” In re Marriage of Watkins, 2017 IL App (3d) 160645 (Citations Omitted)
If the court grants you permission to declare your children on your taxes, you MUST be current on your child support in order to do so.
“Such an order must provide that the execution of the declaration is contingent upon the custodial parent’s receipt of child support payments, if the noncustodial parent is ordered to make them.” In re Marriage of Einhorn, 178 Ill. App. 3d 212, 225 (Ill. App. Ct. 1988)
How Claiming Children Works Under The Tax Code
Before we begin, it must be brought to your attention that the Tax Cut And Jobs Act of 2017 (The Trump Tax Cut) changed everything about claiming children.
As of the date of the publishing we do not have the IRS guidance documents for the 2018 year but we do have previous years and the text of the Tax Cut And Jobs Act.
You are unmarried for the whole year if either of the following applies. 1) You have obtained a final decree of divorce or 2) have separate maintenance by the last day of your tax year. IRS Publication 504 (not updated for 2018)
Prior to 2018, you could exempt $ 4150 of your income from taxes for yourself and each child you claimed. Now, there’s no claiming children for the purposes of exemption. If you are unmarried and paying at least half the costs of keeping a home you are “the head of household”
As the head of a household you get a standard exemption of $ 18,000. So, the first $ 18,000 of your income will not be taxed.
So, does this mean that it doesn’t matter who claims the children? No. It still matters!
The child exemption is gone but the child tax credit still exists. In fact the child tax credit goes up to $ 2000 per child for the 2018 tax year (where you file in April 2019). So, if at the end of 2018 you owe the IRS $ 5,000 but you have two children, you will only apply a credit of $ 4,000 ($ 2000 X 2) against the $ 5,000 you owe so you will only owe $ 1,000.
If your credit is higher than what you owe the IRS will not send you extra money.
There are still limits to the child tax credit. IRS Publication 972 (not updated for 2018). You can only claim the child tax credit if your income is less than: $400,000 for married joint-filing couples and $200,000 for all others.
If you’re above the $ 400,000 or $ 200,000 threshold there is a complicated “phase out system” that gives you some of the credit but not all of it depending on your income. The important point for your divorce lawyer is to tell him to “keep declaring my children”
The earned income tax credit is for an extra bonus for parents with one to 3 children who make less than approximately $ 40,000 to $ 50,000 a year (depending on the number of children). The credit from this portion of the tax code can be as high as $ 6,431 in 2018.
Please, remember that your divorce lawyer is not an accountant and may not be familiar with these new rules yet. Tell him to that you want to continue to declare your children on your taxes.
If there’s no court order as to claiming the child for tax purposes, the default is that the parent with the most nights with the child is the “custodial parent” and the custodial parent gets to claim the child.
Specifically, a child will be treated as the qualifying child of his or her noncustodial parent for purposes of claiming an exemption and the child tax credit if the parents:
- Are divorced or legally separated under a decree of divorce or separate maintenance,
- Are separated under a written separation agreement, or
- Lived apart at all times during the last 6 months of the year, whether or not they are or were married.
- The child received over half of his or her support for the year from the parents.
- The child is in the custody of one or both parents for more than half of the year.
- Either of the following statements is true.
a. The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332.
b. A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2017 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2017. IRS Publication 596 (Not updated for 2018)
Again, if there is an order in the divorce judgment for who declares the child for tax purposes…then you just follow the order.
If the Most judges at the Daley Center think the equitable thing to do is to allow each parent to declare the child every other year or in the case of two children, to let each parent declare one. If there are three, then each parent declares one child and they rotate the third child…and so on.
As for Illinois state taxes, there are still deductions for children and the custodial rules are approximately the same as the federal rules.
To the best of my knowledge, there are no deductions for children in regards to City of Chicago taxes.
Beyond the kids there are various tax implications for divorce that you’ll need to be familiar with.
Taxes and divorce go hand in hand, yet most divorce lawyers seem allergic to tax issues.
Contact my Chicago, Illinois law office to learn more about how claiming your children will effect your Chicago, Illinois Divorce.
If you’re looking for a great Chicago accountant, I strongly recommend my close friend, Jeff Upchurch. His office is just 7 miles from my office. Directions below: