Children of separated parents - who gets the exemption?
(Revised November 2012)



There are specific rules for claiming a child of parents who are separated for a period that includes the last six months of the year. For purposes of these rules the 'custodial parent' is the parent who the child lives with during the last six months of the year and the 'non-custodial parent' is the other parent. In almost all cases the custodial parent is entitled to the tax exemption for the child, unless the custodial parent signs release on Form 8332, Release of Exemption, to the non-custodial parent.

In July of 2008, the IRS issued new regulations concerning the tax exemption of children of divorced or separated parents. Except for a child who is considered 'emancipated,' the new rules favor the 'custodial parent.'

The new IRS Regulations made two major changes starting in 2009:
  1. For divorces finalized after July 1, 2008 the non-custodial parent cannot rely on the divorce decree, regardless of the provisions in the decree. The non-custodial parent needs a Form 8332, Release of Exemption, signed by the custodial parent.
  2. The signing of a Form 8332 by the custodial parent is no longer a guarantee that he or she is guaranteed the exemption for the child. The IRS rules now allow the custodial spouse to revoke his or her decision to release the exemption by simply notifying the other parent in writing.
In certain cases, pre-July 2008 decrees can be used in lieu of a Form 8332, but the rules are complicated. If this is your situation, you need to contact your tax advisor.

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