Jackson Hewitt® Tax Tips: Divorced/Separated Parents Claiming Child-Related Tax Credits and Deductions

Mar 07, 2011, 10:40 ET from Jackson Hewitt Tax Service Inc.

PARSIPPANY, N.J., March 7, 2011 /PRNewswire/ -- Taxpayers with children are often aware of various tax credits and deductions available to them, such as an exemption of up to $3,650 per child and a Child Tax Credit of up to $1,000 per qualifying child under age 17.  But according to Jackson Hewitt Tax Service®, there is often confusion about exactly who can and should claim these tax benefits, particularly divorced or separated parents.

"For divorced or separated taxpayers, the most important thing to know is that only one parent is allowed to claim a child on a tax return as a dependent," explained Mark Steber, chief tax officer, Jackson Hewitt Tax Service Inc. "Usually it is the 'custodial parent,' which means the parent with whom the child lived for the greater number of nights during the year. However, if the child lived with each parent for an equal number of nights during the year, the parent with the higher adjusted gross income becomes the custodial parent for tax purposes."

In addition to determining who can claim the child when filing an annual tax return, Steber raises other key questions to ask:

  • Who is considered a "child" for tax purposes?
    • The uniform definition of a child establishes that, for tax purposes, a child is the natural child, stepchild, adopted child or eligible foster child of a taxpayer.  An adopted child is one who has been legally adopted, or a child who has been lawfully placed by an authorized placement agency for legal adoption. An eligible foster child is one who has been placed by an authorized agency or by a judgment, decree or other order of any court of competent jurisdiction.  Also, the child Must be under the age of 19 at the end of the tax year, or under the age of 24 if a full-time student for at least five months of the year, or be permanently and totally disabled at any time during the year.

  • When is it beneficial for a single taxpayer with dependent children to file as Head of Household?
    • The Head of Household tax rate is usually lower than that of those filing as single or married filing separately. The standard deduction is also higher by choosing this status. In order for a single taxpayer with dependent children to file as Head of Household, the following conditions must be met:
      • You are unmarried or "considered unmarried" on the last day of the year
      • You paid more than half the cost of keeping up a home for the year
      • You had a "qualifying dependent" living with you in your home for more than half the year

  • How long do parents have to be divorced or separated in order to file as Head of Household?
    • Because the IRS determines marital status based on the last day of the tax year, taxpayers who are separated or in the process of getting divorced may be able to file as Head of Household even if the divorce is not yet final as of midnight on December 31.  In order to be "considered unmarried," both spouses must have lived apart in separate households for the last six months of the year and must not file a joint tax return this year.  

  • What credits can custodial parents claim when filing their taxes?
    • Custodial parents may also claim a range of credits, including:
      • Earned Income Tax Credit
      • Child and Dependent Care Credit
      • Education Credit

About Jackson Hewitt Tax Service Inc.

Based in Parsippany, N.J., Jackson Hewitt Tax Service Inc. (NYSE: JTX) is an industry leading provider of full service individual federal and state income tax preparation, with franchised and company-owned office locations throughout the United States.  Jackson Hewitt Tax Service® also offers an online tax preparation product at www.jacksonhewittonline.com.  For more information, or to locate the Jackson Hewitt® office nearest to you, visit www.jacksonhewitt.com or call 1-800-234-1040.  Jackson Hewitt can also be found on Facebook and Twitter.

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SOURCE Jackson Hewitt Tax Service Inc.