By Jeff Town and Marc Patoile
One issue that often arises in Colorado divorce involving children is the question of how to allocate the right to claim dependent children for income tax purposes. This is now called the child tax credit.
Allocation of the dependency exemption also arises in paternity cases or in allocation of parental responsibilities. In short, in any legal proceeding involving children in Colorado divorces, the parties should consider the allocation of the dependency exemption/child tax credit as a potential issue and this is an important issue that can have a lasting impact until the children are no longer eligible to be claimed, often through college or even longer. An experienced Colorado family law attorney can help navigate through the maze, often with the input of your tax advisor who can assist you in determining the exact amount of your tax savings by having the exemption, or not, and other related questions such as head of household designations and dependent care credits.
Our family law attorneys work with families throughout the Denver area to help clients reach agreements or have courts decide these issues, together with a designation of a primary residential custodian. The requirement for the residential custodian designation was eliminated under more modern changes in family laws, but still exists in various other state and federal statutes, so it remains an important issue to address in child custody cases.
As of the writing of this article, the Child Tax Credit helps families with qualifying children get a tax break. You may be able to claim the credit even if you don’t normally file a tax return.
Who qualifies:
You can claim the Child Tax Credit for each qualifying child who has a Social Security number that is valid for employment in the United States.
To be a qualifying child for the 2024 tax year, your dependent generally must:
- Be under 17 at the end of the tax year.
- Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece or nephew).
- Not provide more than half of his or her own support for the tax year.
- Have lived with you for more than half the tax year.
- Be claimed as a dependent on your return.
- Not file a joint return for the year (or filed the joint return only to claim a refund of taxes withheld or estimated taxes).
- Be a U.S. citizen, U.S. National or a U.S. resident alien.
- Must have a Social Security Number that is valid for employment and is issued before the due date of your tax return (including extensions).
You qualify for the full amount of the 2024 Child Tax Credit for each qualifying child if you meet all eligibility factors and your annual income is not more than $200,000 ($400,000 if filing a joint return).
Parents and guardians with higher incomes may be eligible to claim a partial credit.
Divorcing couples or those parents who are involved a Colorado child custody case often ignore or gloss over this important issue, but it is an issue that can have significant financial ramifications for many years following the dissolution of their marriage.
The Colorado child support statute, Colorado Revised Statutes Section 14-10-115, is the provision where the Colorado law concerning the parents’ allocation of the dependency exemption for tax purposes can be found. Colorado Revised Statutes Section 14-10-115(12) states:
Unless otherwise agreed upon by the parties, the court shall allocate the right to claim dependent children for income tax purposes between the parties. These rights shall be allocated between the parties in proportion to their contributions to the costs of raising the children. A parent shall not be entitled to claim a child as a dependent if he or she has not paid all court-ordered child support for that tax year or if claiming the child as a dependent would not result in any tax benefit.
The phrase “shall be allocated between the parties in proportion to their contribution to the costs of raising the children” is not otherwise defined under the statute. Our seasoned Douglas County family law attorneys can clarify this phrase and how it is interpreted by Colorado divorce judges and other Denver family law attorneys. The experienced family law attorneys at Folkestad Fazekas Barrick & Patoile, P.C., strategically based in Douglas County serving the entire Colorado Springs to Boulder County corridor can help you today.
