When we think of taxes on children we immediately think of the tax exemption for children. The tax considerations are greater than simply who gets the exemptions. There are a number of other expenses which also go with the children. In order to determine what law applies to you, you need some professional guidance.
The tax exemption for the children is not decided based on what payments a parent makes for a child. It does not depend upon who pays the most for the child. It does not depend upon the payment of child support. Rather, it depends upon where a child lives and for how long.
If one parent has sole physical child custody that person gets the federal and state exemption unless they have agreed or court orders to the contrary. But it is not all that simple. If the parents have the children 50/50, then the exemption goes to the parent with the higher adjusted gross income.
There are also other tax deductions and adjustments that may result in saved tax dollars.
HEAD OF HOUSEHOLD FILING STATUS
Some tax benefits go to the parent with custody of the child. An example is the head of the household filing status. Head-of-the-household status results in a different and lower tax rate than filing as a single taxpayer. In order to be eligible to file as head of household, the person claiming that filing status must have custody of a minor child.
CHILD AND DEPENDENT CARE DEDUCTION
The child and dependent care deduction also belong to the custodial parent.
CHILD TAX CREDITS AND EDUCATION CREDITS
Some credits do not depend upon physical custody. They depend upon who claims the child exemption. Even a non-custodial parent may be eligible to claim child tax credits and education credits.
As you can see, these issues are not simple and require your careful consultation with your Maryland family law attorney your tax advisor. Using all of the tax benefits that are allowed by the Internal Revenue Service and the State of Maryland can result in significant tax savings. In order to determine what tax law applies to your particular situation, you need professional guidance.