Can Non-Custodial Parents Use Kids for Tax Credits?

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The federal Child Tax Credit provides a credit of up to $1,000 per qualifying child. To qualify, though, a child must meet the standards set by the Internal Revenue Service. The IRS uses six tests to establish whether a taxpayer’s child meets the qualifications standard. One test criteria is that the child must have lived with you for more than half of the tax year. You cannot claim the tax credit if your child did not live with you for at least half of the year. This applies regardless of which parent has custody of the child, and the standard is based on the tax year. A non-custodial parent can claim the tax credit if he had custody for more than half of the tax year. This is an important consideration when custody switches from one parent to the other.

Support Requirement

In addition to the residency requirement, you must have provided more than half of the support for your children to claim the Child Tax Credit. While you are the non-custodial parent, you might have met this requirement via child support and other voluntary support payments. You must document your support to support your claim. Remember that the support requirement pertains to the tax year and not the support provided when an income tax return is filed.

Income Limit

If you meet residency and support requirements, you still cannot claim the Child Care Tax Credit unless you also meet income limit requirements. Essentially, the IRS only allows you to claim the credit if your income is below a certain threshold. For single filers, the credit begins to phase out at $75,000 in income, based on 2011 figures. As income increases from that point, your credit decreases and eventually results in a zero credit. For married couples, the credit phase out point is $110,000 as of 2011. If you file as married with separate returns, the 2011 phase out begins at $55,000.

Residency Exception

The IRS allows for a few exceptions to the residency requirement. If a child was born or died or was kidnapped during the tax year, you can claim the Child Tax Credit if the child lived with you during the majority of the corresponding time period. If the child was born six months into the tax year, this would mean that you would be able to claim the credit only if the child lived with you for more than three months of the tax year.

Child Care Tax Credit

In addition to the Child Tax Credit, you can claim the Child Care Tax Credit if your child meets the residency requirement. The support requirement does not apply, but you must have provided for the cost of child care for the child to claim a credit. The credit equals up to 35 percent of your qualifying expenses up to $3,000, based on figures for tax year 2010. For two or more children, the maximum credit is $6,000.