DIVORCE: Federal Income…

Which parent receives the income tax exemption is often a very important issue in divorce or legitimation proceedings.  The federal income tax exemption for children (26 U.S.C.A. § 152(e)) in the Internal Revenue Code can result in a substantial tax return each year.  While married parents often enjoy this tax benefit together, it can become a very sought after benefit in a divorce proceeding.  The law in Georgia, however, is quite clear about whom gets the exemption.

In Blanchard v. Blanchard, 261 Ga. 11 (1991), the Georgia Supreme Court held that a “[Georgia] trial court was not authorized to award federal income tax dependency exemption for parties’ children in divorce proceedings by ordering custodial parent to execute waiver required by Internal Revenue Code to enable non-custodial parent to claim exemption; such award would be exertion of power of taxation, and that power is not subject to state control.”  Id.  The statutory language of 26 U.S.C.A. § 152(e)(1) is clear.  It begins, “Custodial parent gets exemption – except as otherwise provided in this subjection….”

One of the exceptions within the statute allows a custodial parent to release the exemption by consent.  26 U.S.C.A. § 152(e).  In a lot of divorce negotiations, one parent may agree to release the exemption to the non-custodial parent on a limited basis (e.g., every other year).  Under the holding in Blanchard, however, a custodial parent does not have to grant this request by the non-custodial parent.  The law in Georgia is clear, the custodial parent gets the tax exemption unless he/she consents otherwise.

It will be important, however, for the non-custodial parent to review the child support worksheets and request a deviation based upon the child and dependent care tax credit.  If the custodial parent is receiving the exemption, it is very likely that the party also receives a tax credit for the child.  If a parent is entitled to this tax credit, the court “may deviate from the presumptive amount of child support in consideration of such credit.”  O.C.G.A. § 19-6-15(i)(2)(E).  It is very important to consult with an attorney when navigating a divorce involving custody of children.  Please contact an attorney at The Law Office of John B. Jackson to discuss your divorce matter.