I am sure that with the new year many people are thinking about filing their taxes. This post is designed to answer some of the questions I am often asked about taxes and child support with parents living separate in Idaho.
Usually in Idaho the child support order or the decree of divorce states who will declare the children as a dependent on their taxes and the support order includes tax exemption compensation to the parent that does not declare the children as a dependent. Unfortunately many times people do not carefully look to the order or decree as to who can declare the children as a dependent. If you are confused or the wrong person declared the children as a dependent, contact an attorney immediately.
CERTAIN TAX EXEMPTIONS NOT INCLUDED IN CHILD SUPPORT. There are many tax benefits that regarding your children, and an order which states that one parent can declare the children as a dependent, may not state who can declare the children for the EARNED INCOME TAX CREDIT, CHILD CARE TAX CREDIT, or the HEAD OF HOUSEHOLD DESIGNATION. Please contact your tax professional because the Federal Tax Code may state that only a person who has the children for 51% of the calendar year can declare the children for the benefit of the EARNED INCOME TAX CREDIT, CHILD CARE TAX CREDIT, or the HEAD OF HOUSEHOLD DESIGNATION. Tax policies change year to year and this is a reminder to check with a tax professional not tax advice. The Idaho Child Support Guidelines are clear that the EARNED INCOME TAX CREDIT, CHILD CARE TAX CREDIT, or the HEAD OF HOUSEHOLD DESIGNATION are not included in the calculations.
SIMPLE TAX EXEMPTION COMPENSATION EXAMPLE. An oversimplified example of this compensation would be if the father is paying $200 in child support and can declare their one child as a dependent he gets approximately $1800 per year from declaring the child as a dependent. Because the mother in this example earns 25% of the total family income she would receive an additional amount each month with her child support as compensation for the fact that the father gets a credit of $1800 each year in his taxes an approximate calculation would be $1800/12 X 0.25 = $37.50. The Tax Exemption Compensation of $37.50 is added to the $200 he owes each month and increases his obligation to $237.50. If the example were changed and the mother were to declare the minor child as a dependent on her taxes she would receive $112.50 less in child support $1800/12 X 0.75 = $112.50 and the total child support amount would be $87.50 but she would get the additional $1800 per year. Please be aware that the total yearly amount that the tax dependency varies according to income and the Idaho Child Support Guidelines has a table of the estimated benefit per income level.
Idaho Rules of Civil Procedure Sec. 6(c)(6) (Sec. 8(c))
"The parties may agree to an allocation of the dependency benefits. Otherwise, the court should assign the dependency exemption(s) to the parent who has the greater tax benefit calculated from the tables below using the marital status and guidelines income of each parent at the time of the child support award calculation. The parent not receiving the exemption(s) is entitled to a pro rata share of the income tax benefit or child tax credit in proportion to his/her
share of the guidelines income. The pro rata share of the income tax benefit will be either a credit against or in addition to the basic child support obligation and shall be included in the child support order."http://www.isc.idaho.gov/files/ICSG-July_1_2012.pdf