New York Divorce and Claiming Children as Dependents Under the New Tax Law

When a divorce takes place between partners with children, there’s a lot more to consider than just who will maintain custody of the child. One of the standard issues that I address with myclients is who will be able to claim the child as a dependent on their tax returns. After all, the tax credits associated with caring for a child can be substantial and may help a great deal with transitioning to the new life.

As usual I advise that I am not a tax lawyer and therefore for specifics about taxes everyone is advised to consult with tax professionals such as CPAs.  This blog, however, is to outline some of the new concerns, after passage of the tax reform law, that people need to think about regarding children, taxes and child support agreements.  Because of the new tax laws passed in December 2017 in the United States, the rules surrounding tax and support in New York divorces and everywhere will change dramatically, which could lead to more complex discussions between divorcing parties. For instance, in the past, it has been common for the custodial parent to claim for the child.  The parties often make agreements that the non-custodial can claim the children or some of the time claim the child(ren) if he or she was responsible for a significant amount of child support. Now, as my last blog pointed out, that after 2018 maintenance (alimony) payments will no longer be able to be deducted from income for tax purposes, it may be that child support paying party might find the dependent claim more important than in the past for tax purposes.  The deductibility of child support payments is not changing as still child support payments are not deductible for child support purposes and it is not income for the recipient. 

Discussing the Rules around Child Support

Deciding child support and children as dependents, specifically who can claim a child or children as a dependent on a tax return can be a complicated process, particularly in scenarios where parents might share custody of the kids. As a child custody attorney and divorce mediator, one of the scenarios that I often work through with my clients involves sharing the dependent claims between both parents. If the payor parent is current and up-to-date with his or her child support payments, then the individuals involved may decide to alternate years of claiming if there’s only one child involved. On the other hand, if there’s more than one child, each parent might choose to claim for a specific youngster. Sometimes the custodial parent claims the deductions all the time, sometimes the non-custodial parent claims the deduction(s) all the time.

The changing laws under the new tax reform law will change the way that many parents approach the complexities of child tax credit and tax returns.  According to Motley Fool, LLC, for 2018, the amount of credit that parents will be eligible to claim is doubling, which means that there’s some extra money available for parents to tap into. The tax reform law upgrades the amount you can claim for a single child from $1000 to $2000.

Motley Fool, LLC explains that additionally, more of the credit will be refundable according to the new tax laws. A credit that is nonrefundable can be used to bring the bill of a taxpayer down to zero, but a refundable credit can be awarded even if a payer has no liability at all. this means that if the tax you need to pay for the year is $2000, but you have $2500 to claim, you can get rid of your tax bill, and claim the extra money back too. This means that Americans in search of additional help giving their children the life they’ve grown accustomed to following a divorce can have an easier time with the government.

Of course, there’s always a chance that the new laws around tax credits may make it easier for some parties to come to terms about the decision of spousal maintenance and child support after a divorce. The fact that the paying spouse can no longer claim deductions on his or her payments for maintenance is likely to make negotiations more difficult for some couples. However, agreement can still be made that can benefit each party.

Ultimately, making decisions about child taxes, child support, and maintenance payments can be a confusing experience for parties from any background. Now that the tax laws are changing, it’s likely that many divorce couples will need the support of a well-informed matrimonial practitioner to guide them through the complexities of their future financial obligations. While some concerns will need to be settled through litigation, I often find that coming to negotiations about child and spousal support, and the surrounding circumstances involved can be a lot easier through alternative dispute resolution methods like mediation and collaborative law.

To find out more about the complexity of taxes following a divorce, the issues that you might address around custody and maintenance, and more, please browse through some of my other blog posts, or reach out to me. I’m available both over the phone at 516-333-6555 or through my online contact form for your initial consultation, up to a half hour free.