Which Parent Receives the Child Tax Credit in Minnesota?
How Are Dependency Exemptions and Child Tax Credits Divided Between Minnesota Parents?
Tax concerns are a primary issue for many Minnesota parents, particularly those who have separated from the other parent of their child or children. Many Minnesota parents find themselves fighting over claiming dependency exemptions or child tax credits for their children, and may even engage in racing the other parent to file taxes in hopes of receiving the tax credit. The United States provided significant benefits for those claiming children on taxes, and it is not surprising that disputes over such benefits often arise in the context of Minnesota child custody and parenting time cases.
The simple answer to questions about child tax benefits is that in the absence of a controlling court order, the federal tax code determines which parent may receive child tax credits. This may be unhelpful if federal tax code ramifications are unclear or there are disputes over support for the child or child care costs.
In short, the federal tax code presently provides that a taxpayer may claim a child tax credit for a “qualifying child.” The code also provides generally that the parent with whom the child lived for more than half of the year can claim the child as their qualifying child. The IRS typically deems this parent to be the “custodial parent” for purposes of this calculation. Somewhat confusingly, this does not depend on Minnesota custody labels such as “legal custody” or “physical custody” and instead is purely determined by which parent has more time with the child during the year. This really means that parenting time division controls the default arrangement, which may come as a surprise to parents with sole legal or sole physical custody but less than half of parenting time with the child.
However, even if this is the case, a non-custodial parent may still claim the child if the custodial parent releases the exemption through IRS Form 8332. The IRS requires that this form be completed even if a court order awards the dependent exemption to the non-custodial parent.
Can Minnesota Courts Award Parents the Right to the Child Tax Credit?
Yes. Through a child support order, Minnesota law allows courts to allocate the child dependency exemption between the parents. In weighing which parent should be allowed to claim the child, the court considers:
The financial resources of the parties;
If not awarding the dependency exemption negatively impacts a parent’s ability to provide for the needs of the child;
If only one party or both parties would receive a tax benefit from the dependency exemption; and
The impact of the dependent exemption on either party’s ability to claim a premium tax credit or a premium subsidy under the federal Patient Protection and Affordable Care Act
Additionally, if a parent has less than 10% of court ordered parenting time, a Minnesota Court may not award them the dependency exemption. Often Minnesota Courts choose to split or alternate this exemption so that the parents can claim the child every other year. This often provides the most benefit to both parents so that they can both adequately support the child.
However, this can be a complex issue and Minnesota parents should be prepared to thoroughly explain to the judge why they should be legally entitled to this exemption. The Minnesota child custody attorneys at RAM Law PLLC are experienced in navigating complex child tax dependency issues. If you are facing a child tax dependency or credit dispute, reach out to our attorneys by phone at 651-468-2103 or by submitting our online consultation form.