9.4 Dependency Exemptions

9.4 Dependency Exemptions aetrahan Fri, 02/03/2023 - 10:39

Dependency exemptions were once used to reduce taxable income, but 2018 legislation eliminated the dependency exemption in favor of higher standard deductions for all filing categories.

For previous years in dispute, the custodial parent is generally entitled to the dependency exemption under I.R.C. § 152(e). However, under I.R.C. § 152(e), the child may be treated as the dependent of the non-custodial parent if four conditions are satisfied:

  1. The parents are divorced or legally separated, separated under a written separation agreement, or lived apart at all times during last 6 months of the year.
  2. The child received over half of his support from the claiming parent.
  3. The child is in the custody of one or both of the parents for more than half the year.
  4. The custodial parent signs an IRS Form 8332, and the non-custodial parent attaches the declaration to his/her return. This form explicitly states that the custodial parent is giving up the right to claim the child for that year. The IRS no longer accepts court documents in lieu of the signed Form 8332, although it had previously.

Under Louisiana law, there is a presumption that the domiciliary parent has the right to claim dependency exemption deductions and the Earned Income Credit.1  However, Louisiana law also provides that a court may order a reallocation of the dependency exemption deduction upon proof that no child support arrearages are owed and that reallocation to the non-domiciliary parent will substantially benefit the non-domiciliary parent without significantly hurting the domiciliary parent.2

Although the exemption is no longer available, claiming dependents can still be important for other reasons. The real tax advantages come from the Earned Income Credit, extra Child Tax Credits, and credits for childcare expenses. In some cases, a separated but married spouse may need the dependency exemption to qualify for the head-of-household filing status and the Earned Income Credit.

  • 1La. R.S. 9:315.18(A).
  • 2La. R.S. 9:315.18(B)(1)(b); State, Dep’t of Soc. Servs. v. Mason, 09-1088, p. 8 (La. App. 5 Cir. 6/29/10), 44 So. 3d 744, 749.