First, it is important to understand that a judge in Texas deciding divorce issues is a state court judge. A claim for the dependency exemption for a child for federal income tax purposes is a federal issue. Federal trumps state, so the divorce judge cannot decide who gets the dependency exemption. The parents, however, can reach an agreement which is incorporated into the final decree of divorce or post-divorce. In certain circumstances, this can be binding on the parents. It is important, then, to be aware of IRS rules regarding dependency exemptions during and after a divorce.

The general IRS rule for deciding which parent is entitled to the exemption of a child of divorced parents is that the parent having custody for the greater part of the year (“custodial” parent) is the one entitled to the exemption. If the child resides with both parents an equal number of nights, the rule then becomes the parent with the highest adjusted gross income is treated as the custodial parent. The parent entitled to the dependency exemption under these rules can release the claim for the exemption to the noncustodial parent by signing an unconditional written declaration releasing the exemption to the noncustodial parent. IRS Form 8332 is the form used for this purpose. Other “written declarations” could conceivably meet the statutory requirements, but the safest way to insure that the exemption is released to the noncustodial parent is to use this form. It has been specifically held that divorce decrees and separation agreements do not meet the requirements. For pending divorces, IRS Form 8332 should be attached as an exhibit to the divorce decree as an example of the written declaration, and the custodial parent should sign an original of the form at the same time he or she signs the divorce decree.

Can the release be revoked? The answer is yes, but written notice must first be provided to the parent currently holding the release. The revocation of the release does not become effective until the year after attempts are made to provide it to the noncustodial parent.

For more information or questions, a tax professional should be contacted.