Can unmarried parents living together use Form 8332?

Question of the week: Can unmarried parents who live together use Form 8332 to release their child’s tax benefits from one parent to the other?

February 06, 2020

Q. Can unmarried parents who live together use Form 8332 to release their child’s tax benefits from one parent to the other?

My client lives with her boyfriend and their 10-month old daughter. He is the baby’s father. She would like for him to claim the child tax credit on his return. Can she use Form 8332 to release the daughter’s CTC to her boyfriend and keep the other tax benefits (EIC, etc.)? Or, can they just agree between themselves to split the benefits? Wasn’t there a famous court case about never-married parents years ago?

A. Unmarried parents may use Form 8332 to release the child’s claim, but not if the parents are living together.

The Form 8332 release can potentially be used by couples who are not married but there is an additional requirement: the couple may not live together during the second half of the year.

Under the special rule of §152(e) for divorced and separated parents, a custodial parent may release a child's exemption to a noncustodial parent if:

  • One or both parents provide more than one-half of the child’s support,
  • The child is in the custody of one or both parents for more than half the year, and
  • The child’s parents are
    • Divorced or legally separated under a decree of divorce or separate maintenance, or
    • Separated under a written separation agreement, or
    • Living apart at all times during the last 6 months of the year.

The landmark case you refer to is King v. Commissioner, T.C., 121 T.C. 245 (2003). In that case, the IRS contended that the special rule applies only to parents who married and then divorced or separated. The Tax Court held that the special rule of §152(e) applies as well to parents who have never married.

The important distinction between this case and your client’s is that in King the child’s unmarried parents had separated soon after their child was born and did not live together at all during the years in question. In your client’s situation, the parents apparently continue to live together with their daughter. Thus, the special rule cannot be applied, and a Form 8332 release would be invalid.

Instead, the tie-breaker rule of §152(c)(4) applies. The parents can agree between themselves for one or the other to claim their daughter, but they may not split tax benefits. It’s usually a good idea for parents in this type of situation to determine which one would have the better overall tax benefit. For instance, it could be that either parent could claim the CTC but only one is eligible for the EIC or head of household filing status. If each parent tries to claim her, even if they claim different tax benefits, the tie-breaker “winner” would be the parent with the higher AGI.

Originally published in the 02/05/20 edition of TAX in the News

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