When parents are divorcing, or even in the initial portion of a separation there is not always a clear answer to whom is allowed to claim the children when it is time to file taxes.  This is especially true if the divorce proceedings occur very early in the year and the parents both normally file taxes early. 

Some of the best things that can help determine according to the tie-breaker rules who is able to claim a child depends on the parents of the child.  The IRS will give first right to claim a child to their natural or legal parents.  This means that if Aunt Suzy and the child’s father both attempt to claim the exemption that the father will be allowed the exemption because he is the parent, while Aunt Suzy is not a parent of the child. 

Alternate arrangements are determined if neither party claiming the exemption is the parent.  However, if the two people claiming the deduction are the parents of the child and they are not filing a joint return, which is how the tie-breaker typically comes into effect the exemption will be granted to the parent the child lived with for a longer period of time.  This means if the child lives with the mother for 5 months and the father for 7 months, the father is able to claim the exemption, not the mother.

When you are considering that it is possible for both parents to have the child the same amount of time, for example the parents split up after the tax year ends, or the child lived with both parents an exact 50/50 split then the parent awarded the exemption is the parent with the higher AGI or adjusted gross income. 

Next tie-breaker is determining when neither person claiming the child is the parent of the child.  This is a bit more complicated unless there is not a parent trying to claim the child.  If no parent is in sight trying to take the exemption then it is awarded to the person with the highest AGI or adjusted gross income. 

As you can see, it is not always easy trying to determine who is allowed the exemption when you are working out tax issues.  As always if, you have any major issues that you cannot find the correct answer for you should seek the advice of a qualified tax accountant to ensure that you are not possibly making a mistake that could end up very costly. 

In addition, it is important to note that these tie-breaker rules only count when there are two people who have already filed their taxes and the IRS is trying to determine which of the two honestly has the legal right to claim the exemption for the child.  These rules and tie-breaker guidelines are not applicable to any other situation or tax purposes.  If you are unsure, whether your spouse will attempt to claim the exemption you now know how it will be handled, however the process is much easier if you and your spouse work out an agreement amongst yourselves.

If you are in the midst of a divorce or separation it is also advisable to have your lawyers work out an agreement or seek the order of a judge giving one of the parents the right to claim the exemption if you foresee it being a problem before taxes are filed.  This will save more time and hassle in the long run, but should only be used as a last resort if you are not able to work out an agreement with your spouse.