Tax Information Screen
This page was updated on March 9,2019
Who would best benefit by claiming the kids?
Click Here to watch our YouTube video to help you understand how to use Iowa Support Master in determining who should claim the kids. A feature you probably have never used.Who may claim the child? Unless you and your spouse file a joint tax return, a child can only be a claimed as a dependent by one parent. This requires that the child doesn't provide more than half of their own financial support and reside with you for more than half the tax year. This only applies to children under the age of 19, or under the age of 24 if attending school full time.
May a NCP claim a child? Yes. There is one exception to the residence requirement that allows the non-custodial parent to claim their child as a dependent. The non-custodial parent can claim the child as a dependent if the custodial parent agrees not to on their own tax return. You may want to have a signed IRS Form 8332 in hand should the IRS come calling.
Number of Dependent Children The new tax bill that went into effect on January 1, 2018 no longer provides for personal exemptions. Claiming the kids these days has to do with "tax credits". See below. Forms 1 and 2 will change on January 1, 2019.
Congress doubled the standard deduction values. Filing as single was worth $6,350 in 2017, now it is $12,000. Same for Married filing Separate. For Head of House the value went from $9,350 to $18,000.
If you have a case where one, or could be both, parties have kids with other people. Those children are not dependents in your case. Rule 9.6(5) discusses the claiming of dependents of "mutual" children of the parties.
Tax Credits
For children under the age of 17, there is a tax credit of up to $2,000. Filers may claim the full credit if they have income up to $200,000 for single filers (up from $75,000 in 2017) and up to $400,000 for married couples (up from $110,000 2017).
For a dependent who is 17 or older, the tax reform bill allows a nonrefundable $500 "family credit". Iowa Support Master will calculate this for you. This is why you will see in Iowa Support Master a difference between Number of Dependent Children Age 16 or less and Number Age 17 or more.
While Form 1 sets out a line for tax credits, Form 2 does not.
There is no mention of the child tax credit in the guidelines rule on computing taxes under 9.6. The CSRU uses employer estimated withholding tables to compute taxes and views the child tax credit as similar to the earned income credit, which is specifically exempted as income under Rule 9.5(1)(b).
Adoption Credits There are federal tax credits provided to families who adopt children. Families who adopt a child with special needs can claim a federal adoption tax credit. How these funds are handled is determined on a case-by-case basis. There is nothing in the Child Support Guidelines that addresses how these credits are to be treated.
You may want to seek a deviation based on adoption credits. It is an opinion that the benefits are to the children and not of the parent. Is it the property of the parent or the adopted child? This is your issue to argue.
Earned Income Credit This benefit is not included as income to either party per Rule 9.5(1)(3)(b) of the Child Support Guidelines. So why is it important to understand? It can amount to a substantial money from Uncle Sam to the recipient who claims the kids and is of the right income. In 2018, the maximum amount of credit for tax year was: $6,431 with three or more qualifying children. $5,716 with two qualifying children. $3,461 with one qualifying child.
Modification Matters - Dependents
If a party to the modification has had children with a new spouse, you would not indicate those children as dependents. They may qualify as Qualified Additional Dependents.
Filing Status
- Single
- Head of Household
- Married Filing Seperate
Single
Indicate single fling status as this will be the status of your client post-divorce. If your client will be filind Head of Household post-divorce, you would indicate Head of Household.
Head of Household
A party may file as Head of Household if:
1. They pay more than half of the household expenses for the year.
2. They are divorced/separated or lived away from your spouse for at least the last six months of the tax year.
3. They have a "qualifying child" in their home.
It is possible to file head of household even if the divorce paperwork gives the other parent the right to claim the child as a dependent. There is, of course, a tax savings to claim Head of Household vs filing as Single. Go Here to read the IRS rules.
Modification Actions - Single Status
In a modification action, if the party is single, indicate single. If the party is re-married, indicate Married Filing Separate.
Modification Actions - Head of Household
If the party has re-married, you would indicate Married Filing Separate. Do not indicate Head of Household even if they have children and file their returns as Head of Household.
Modification Actions - Married Filing Separate
This is the status you would select if a party to your modification action is re-married.
Additional Tax Credits - School Tax
School tax credits in Iowa are calculated in this manner: take the person's state tax liability - subtract their personal/dependent credits and their state tax credits. Multiply the result by their local school surtax rate. This will then tell you how much they must pay in school tax.