Who Claims the Child Tax Credit After Divorce?

In both Ohio and Kentucky divorces, the allocation of the Child Tax Credit is governed primarily by federal tax law rather than state domestic relations law. Although divorce decrees and parenting plans often address which parent may claim a child for tax purposes, most often by agreement of the parties, the Internal Revenue Service ultimately determines eligibility based on federal rules when the parties cannot agree or are silent on the issue. State court orders can allocate rights between the parents and require cooperation between the parents to effectuate the court’s orders, but the state courts cannot override IRS requirements.

Federal Guidelines for the Child Tax Credit

Under federal law, only one parent may claim a child as a dependent and receive the associated Child Tax Credit (CTC) for a given tax year. The IRS does not allow parents to divide or split the credit. The default rule is that the custodial parent is entitled to claim the child. For tax purposes, the custodial parent is defined as the parent with whom the child resided for the greater number of nights during the tax year. This definition is based solely on physical residence and does not depend on labels such as “sole custody”, “joint custody,” or “shared parenting” under state law. For example, if the child spent 190 overnights with Parent A and 175 overnights with Parent B, under federal tax law the Parent A would be deemed the “custodial parent” tax purposes in that tax year.

If the child spent an equal number of nights with each parent during the year, the IRS applies a tiebreaker rule. In that situation, the parent with the higher adjusted gross income is entitled to claim the child. These tiebreaker rules are applied automatically by the IRS when two parents attempt to claim the same child during the same tax year and no valid release has been filed.

Federal law allows an exception to the custodial parent rule if the custodial parent agrees to allow the noncustodial parent to claim the child. This is accomplished by the custodial parent signing IRS Form 8332, or a substantially similar written declaration, releasing the dependency claim for a specific tax year or years. The noncustodial parent must attach the signed form to their tax return. Without this form, the IRS will deny the noncustodial parent’s claim even if a divorce decree states that the noncustodial parent is entitled to claim the child.

Application in State Courts

In Ohio, courts addressing child support are required to consider which parent may claim a child as a dependent for federal income tax purposes. If the parents agree, the court may adopt that agreement as part of the divorce decree or custody decree. Agreements on this issue are not uncommon and are best to be clearly addressed in a parenting plan.

If the parents do not agree, the court may allocate the tax claim in a manner that serves the child’s best interests, considering factors such as parenting time, financial circumstances, and compliance with child support obligations. However, even when an Ohio court awards the tax claim to a particular parent, that parent must still comply with federal IRS rules to successfully claim the credit. In high conflict cases, this can lead to future issues concerning a parent’s non-compliance with the IRS rules on this issue.

Kentucky courts also commonly address the allocation of tax benefits in custody and divorce cases. With Kentucky’s strong preference for shared parenting time, courts often alternate the tax claim between parents or allocate it to the parent who will receive the greatest financial benefit; however, as in Ohio, a Kentucky court’s allocation does not replace federal tax requirements or guidelines. The parent claiming the child must either meet the custodial parent test or possess a valid Form 8332 executed by the custodial parent. Absent an agreement between the parents, the IRS guidelines will ultimately govern who is entitled to claim the child for federal income tax purposes.

Conclusion

When parents do not agree on who should claim a child and both attempt to do so, the IRS will apply its own tiebreaker rules. The return that is filed first may initially be accepted, but the second return will be rejected electronically or flagged for review. If the dispute continues, the IRS may require documentation showing where the child resided during the year or proof of a valid Form 8332. Ultimately, the IRS will award the credit according to federal law, regardless of what a divorce decree provides.

Parents are encouraged to clearly address tax credits associated with any eligible children in their divorce decree or parenting plans to ensure that any agreed-upon allocation aligns with IRS requirements. Agreements that include alternating years or noncustodial claims should expressly require the custodial parent to execute Form 8332 as needed. While state courts can enforce compliance through contempt or other remedies, the IRS will look only to federal tax law when determining who is entitled to claim the CTC.

If you have questions about how child tax credits may be handled in your divorce or parenting plan, or want to make sure everything is structured correctly from the start, reach out to Strauss Troy attorney Jonathan Thiel at jdthiel@strausstroy.com.