Federal Tax Dependency Exemption and the Child Tax Credit in Child Custody Decisions

The general Federal rule followed by the Internal Revenue Service is that the custodial parent is entitled to claim the exemption and child tax credit.

As many already know this is not as straightforward as it sounds because these days, child custody disputes end in many different types of custodial arrangements.  Custodial arrangements can range from split physical custody orders that have one or more children with each biological parent to joint physical custodial arrangements with any given child spending up to 50% of their time with one parent and the remainder with the other parent.

Court Ordered Child Custody Arrangement

DivorceThe first thing to understand is the concept of joint legal custodian.  Joint legal custodian is the right of parents to participate in major decisions affecting the child and the right to be informed of the child’s school progress or medical situation.  It is not part of the analysis about who gets the tax exemption because the tax exemption and the child tax credit are determined based on the court ordered physical child custody arrangement.

The second thing to know is that parents can make an agreement to change who will get the dependency exemption that the Internal Revenue Service will accept.

Why You Might Give up the Tax Exemption

There are a number of reasons why a parent may give up the dependency exemption that they are otherwise entitled to have.   First, in order to gain a concession on the custodial arrangement itself a parent may concede to the exemption being awarded in alternate years.

Second, there are often differences in the effect of claiming the exemption on each parent’s tax burden because parents are often in different tax brackets.   Thus it is possible to shift the exemption from the parent who has custody to the parent having the higher tax burden in exchange for sharing the financial windfall that can result from the shift. This analysis often requires the expertise of a family law attorney and an accountant.

Have This Arrangement Addressed in Court

There is a substantial advantage to having this kind of arrangement addressed in either a Judgment of Divorce or a Modification of Child Custody Order.  If a parent does not have it reduced to an actual Court order, then each tax season becomes a new occasion for a new disagreement.  If both  parent’s claim the exemption without a court order or at least a written agreement for a given tax year, the Internal Revenue Service will schedule a hearing to determine who by way of the general Federal rule can claim the exemption.

States have varied about whether a parent can force another parent to reach an agreement about the dependency exemption when there is child custody.  In Michigan, the Courts have ruled that a state court can require parents to change the dependency exemption in a way that differs from the standard Federal rule.   The Michigan Courts have also ruled that the parents can reach an agreement that is different than the Federal rule and it will be enforced.

Anytime a parent is in a case where their child’s custodial arrangement is at stake, parents should address this issue in their final court order.  For help in this area of family law in Northern Michigan call Vincent J. Maloney at 231-947-3331.


Can a step-parent adopt their step-child?

Step-parent adoptions


can a step-parent adopt their step-child


In Michigan, if certain requirements are met, the answer is yes.   If these conditions are met, the custodial parent and the step-parent can file for a step-parent adoption.   This process has a number of technical elements.  It is best to hire an attorney who has experience in this area of the law.

These requirements are as follows:

  1. The step-parent must be engaged to marry or must be married to the custodial parent.
  2. The non-custodial parent must have failed to provide anything for the child for at least two years.
  3. The non-custodial parent must have failed to have contact with the child for at least two years.
  4. The custodial parent must agree and sign the petition.

The process starts with a petition to adopt which is signed by both the custodial parent and the stepparent.

Part One

The case has two primary parts.   Part one, is the requirement to terminate the non-custodial parent’s parental rights.  Often this involves tracking down the noncustodial parent who has been out of the picture for more than two years.  Sometimes the noncustodial parent cannot be found and a legally complicated process is required to fulfill your obligation to provide notice to the absent non-custodial parent.   Then there is a hearing that is scheduled and testimony must be presented supporting the four requirements listed above in order to proceed with the adoption.

A step-parent can improve their chances to adopt the step-child by actually marrying the custodial parent rather than relying just on an engagement.   The custodial parent can help their case by obtaining documentation from the Court about the non-custodial parent’s failure to pay child support.   Finally, every effort should be made to find documentation to prove the lack of contact between the child and the non-custodial parent.

Part Two

When Part One ends with the termination of parental rights of the non-custodial parent, Part Two begins and leads to the final adoption hearing.  During this part of the case, there will be an evaluation of the:

  • step-parent and custodial parent’s relationship
  • step-parent’s character
  • home environment of the child

During this stage, the step-parent and custodial parent will be asked to obtain character references.   Careful selection of the writers of the references is a big help.

If the custodial parent and parent pass the evaluation,   then a final adoption hearing is scheduled by the Court.  Every one of my step-parent adoption cases at this step in the process has been a very positive and gratifying emotional experience.   The step-parent and the custodial parent are encouraged to bring the child.  The Judges and Court personnel both enjoy the event.

It is hard to predict the amount of time from the filing of the petition to the final adoption hearing.  In my experience, it has ranged from six months to a year.  The biggest variable is whether or not the noncustodial parent is difficult to locate.   The effect of a completed adoption is total.  The former stepparent upon completion is the second custodial parent with all rights and obligations of any parent who is the biological parent.  If you meet the requirements and live in Northern Michigan, please contact me.

Call Vincent J Maloney now, for a free 30 minute consultation and get answers to your questions at 231.947.3331.