CLAIMING A DEPENDENT AFTER DIVORCE
Navigating the complexities of tax law can be daunting, and the recent U.S. Tax Court case of Correll v. Commissioner (T.C. Memo 2025-31) serves as a crucial reminder of the importance of understanding dependency exemptions and child tax credits. This case highlights a common pitfall for divorced or separated parents: claiming a child as a dependent when the child doesn't meet the residency requirements or when a divorce agreement specifies otherwise.
The Heart of the Matter: Who Can Claim the Child?
Melissa Correll, the petitioner in this case, was the noncustodial parent of a minor child. For the 2021 tax year, both Ms. Correll and the child's custodial parent (her ex-husband) claimed the child as a dependent on their federal income tax returns. The IRS responded with a tax return audit and subsequently issued a Notice of Deficiency to Ms. Correll, disallowing her claim of the child as a dependent. The core reason? The child did not live with her for more than half of the year.
Key Legal Principles at Play
At the center of this case are the definitions of a "dependent" and a "qualifying child". For a child to be a "qualifying child," they must have had the same principal place of abode as the taxpayer for more than half of the year. In Ms. Correll's situation, her child did not live with her for more than half of 2021; instead, he lived with his father for the entire year. This fact alone meant he was not her "qualifying child".
Tie-Breaker Rules and Noncustodial Parents
There's a provision that allows noncustodial parents to claim a child as a dependent on their tax return, but it comes with strict requirements: the custodial parent must essentially "release" the dependent by signing a written declaration that they will not claim the child on their return. This declaration must be attached to the noncustodial parent's return. (IRS FORM 8332) Neither of these conditions was met in Ms. Correll's case.
Furthermore, a divorce settlement agreement from Ms. Correll's separation and divorce specifically stated that the child's father was entitled to claim the child as his dependent for the year in question. While this was taken into account by the judge, simply relying on a divorce settlement agreement is very risky! You are much better off filing the FORM 8332.
Impact on Child Tax Credit-She lost that one too!
Because the child was not Ms. Correll's "qualifying child" for dependency purposes, she not only lost out on the dependent exemption, but she lost the child tax credit for him also. A child tax credit can only be claimed for a "qualifying child" who meets the section 152(c) definition and is under the age of 17.
What This Means for You
The Correll case underscores several critical points for anyone navigating dependency exemptions and child tax credits, especially in co-parenting situations:
- Residency is Key: For a child to be a "qualifying child," they must live with you for more than half the year. This is a fundamental requirement.
- Divorce Decrees and Agreements: Pay close attention to your divorce or separation agreements regarding who is entitled to claim children as dependents. Following the terms of the agreement will keep all parties on track and informed---and will likely keep you off the IRS audit target.
- Written Declarations for Noncustodial Parents: If you are a noncustodial parent and wish to claim a child, ensure you have a signed written declaration from the custodial parent, and that it is properly attached to your return.
- Burden of Proof: Remember that the burden of proof generally lies with the taxpayer to demonstrate their entitlement to deductions and credits. Therefore, it is common for the IRS to AUDIT BOTH PARENTS (called a "whipsaw audit) and require documentation from so that the auditor can determine who rightfully may claim the child.
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Disclaimer: The information provided is intended to provide a general overview of the topic presented. It is not intended to be a legal interpretation of your individual tax or legal situation. If there is a conflict between the information provided and any legal authority implementing or interpreting the topic, the legal authority shall prevail. Always seek legal advice from a licensed attorney. This article does not in any way establish an attorney-client relationship. That relationship can only be accomplished with both parties signing a mutual, written agreement.
