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Tax breaks aren't out of your reach after a divorce, part III

In this final part of our series on tax benefits for noncustodial parents in Atlanta, we will talk about tax credits that are only available to custodial parents, even when the noncustodial parent can claim the noncustodial parent rule. These parental rights are not automatically granted to the custodial parent, however, he or she must still earn the tax credits before claiming them.

As the custodial parent is in charge of and cares for a child for more than half of the time, he or she can apply for the head of household filing status. This status provides a better tax incentive than just filing as a single adult, but cannot be transferred as part of the noncustodial rule. The deduction that the custodial parent can take is even larger than as a single adult and the respective tax brackets are looser.

The custodial parent can also receive up to $5,000 in tax-free deductions for child care expenses As long as the childcare expenses are covered under an employer's plan, the custodial parent can apply for the federal-income-tax-free reimbursements. Another child care-related deduction comes in the form of the child care tax credit. This credit is based on a parent's income and range from $600 to $2,100, based on the number of children the parent has.

Finally, a noncustodial parent may not receive the earned income tax credit, even if he or she can claim other tax credits under the noncustodial parent rule. This deduction allows a custodial parent to claim $3,169 for one child and $5,891for three or more children.

Just because a parent may have to give up many of the tax credits to a child's other parent as part of the noncustodial parent rule, it doesn't mean he or she won't be able to receive any of the credits. In an effort to protect the interests of parents, the Internal Revenue Service restricts the amount of credits and liability that can be transferred between divorcing parents.

Source: Smart Money, "Child-Related Tax Breaks After Divorce," Bill Bischoff, March 28, 2012

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William C. Gentry, Attorney at Law

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