April 15 is right around the corner and divorced or legally separated parents likely have many questions related to child tax-related matters. In our last post we discussed potential tax benefits to which custodial parents may be entitled. In this post, we’ll look at child-related tax benefits for noncustodial parents.
Once parents have established who qualifies as the custodial and noncustodial parent, the custodial parent will need to provide a signed agreement allowing the noncustodial parent to claim the child as a dependent. Once this written declaration has been provided, a noncustodial parent may be eligible for the following tax benefits:
•· Child tax credit: Possible deduction of up to $1,000 per child
•· Dependency exemption: For 2011 taxes, deduction amount is $3,700 per child
Additionally, if the dependent child is enrolled in a private school or higher education institution, a noncustodial parent may be able to claim the following:
•· Tuition deduction: Based on noncustodial parent’s income, deduction up to $4,000
•· Student loan interest: Based on noncustodial parent’s income, deduction up to $2,500
•· Higher education tax credits: Based on income and dependent on which credit may apply deduction of between $2,000 to $2,500
In addition to the above-referenced deductions, both custodial and noncustodial parents are typically eligible for the following tax breaks:
•· Child’s medical expenses, if paid by parent
•· Healthcare benefits, tax-free and employer-provided
•· Health savings account tax-free distributions used to cover child’s medical expenses
Tax matters can be complex and making one mistake can make a big financial impact. It’s advisable therefore that divorced parents in Tennessee attempting to determine potential child-related tax benefits consult with a divorce attorney who is experienced with tax matters.
Source: SmartMoney, “Child-Related Tax Breaks After Divorce,” Bill Bischoff, Mar. 28, 2012