Divorce is never easy and, despite the heartache involved, there are many practical arrangements that need to be made to avoid making the situation any more difficult. Tax is one such area and a high number of couples who may have been filing joint returns for years as a matter of course are thrown when it comes to rearranging their tax affairs after a break up.

One of the hardest issues to face with regard to this question is who is eligible to claim the dependency tax exemption for children when they split their time between two parents who both enjoy custody?

Luckily in most cases the answer to this is straightforward and will depend on where the child spends most of their time. If they spend more than half the year with one parent (excluding temporary breaks) then that parent has claim, though it is worth noting that since a recent change in the law this is measured by the number of nights they spend with each parent, not the number of days. (You can get an exemption from this rule if you work nightshifts.)

To claim you still have to fit the following criteria; The child must have a recognized relationship to you (such as child, step child or foster child), they must be under 19 (this limit goes up 24 if they are a full time student and there is no age limit for the permanently disabled) and they must not be providing for more than half of their keep (student loans don’t count towards this.)

As it is normally obvious to whom to child qualifies as a dependent it is rare that a divorced couple filing separate returns will take the hostile step of both claiming tax exemptions for the same child. However, if they do the IRS ‘tie-breaker’ rules will award the exemption to parent with whom the child spent the most nights. If this proves to be equal or for some reason cannot be used as a measure, the exemption will go to the parent with the highest adjusted gross income.

This rarely happens, however it is worth keeping some form of documentation to prove the child has spent the majority of nights with you. You can submit this with your claim to avoid the IRS having to carry out an audit.

This may seem an unfair way of doing things if you have arranged things with your ex-partner so that you do both take an equal amount of care of the child, with maybe only a couple of calendar days deciding who would be “the qualifying parent.”

Many divorced couples, especially those who stay on good terms, help overcome this unfairness using release forms. Using IRS form 8332 the qualifying parent can relinquish their claim for a set tax year/ tax years, allowing the other parent to claim. This can be done in alternating years, or however you choose to arrange the matter.

Michael Thorpe is dedicated to helping people to understand tax issues, from areas as challenging as inheritance tax, to simple questions such as what is an ISA?