Tax Deductions for Expenses Paid for Children Not Claimed as Dependents

Divorce or separation can complicate your taxes. Filing taxes often gets even more complicated when children are involved. There are a number of tax deductions and credits available to parents. Some credits are exclusively reserved for the parent claiming the child as a dependent. There are other credits that are strictly for the custodial parent. If you are not claiming the child as a dependent, you may still qualify to deduct expenses paid for the child.

Custodial and Non-Custodial Parents

Although both parents may have shared custody of a child, the IRS has its own definition of a custodial parent. For tax purposes, a custodial parent is the one a child lived with for the greatest number of nights out of the year. Child support payments are irrelevant when determining custody. Some parents choose to share the deduction by alternating years. Unless this agreement is specified in a divorce decree, the IRS will not allow a non-custodial parent to claim the child as a dependent. A custodial parent can give up her right to claim the child as a dependent by completing IRS Form 8332 Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.

Medical and Dental

When it comes to medical and dental expenses, the child is treated as a dependent of both parents. Both parents can deduct the out-of-pocket amount paid in medical and dental expenses for the year, regardless of which parent is claiming the child as a dependent. To qualify, the child must be in the custody of one or both parents for more than half the year. Expenses are only deductible for the year paid, not the year in which the services were received. At the time of publication, you may deduct the amount by which your medical expenses exceed 7.5 percent of your adjusted gross income. For example, if your AGI is $40,000, then your unreimbursed medical expenses must reach $3,000 before you can begin deducting. The percentage hurdle for qualified deductions is scheduled to change as of January 1, 2013. Refer to the IRS website for the most recent information on deducting medical expenses.

Earned Income Credit

The Earned Income Credit is a refundable credit for certain working people with a low to moderate income. The credit is designed to help you keep more of your earnings. If you are the custodial parent, but the divorce decree specifies it is the non-custodial parent's year to claim the child as a dependent, you may still qualify for the EIC. A non-custodial parent is never eligible for the EIC because residency requirements must be met. If the child lives with both parents equally, parents may choose which one claims the credit. If the parents cannot agree, the parent with the higher adjusted gross income is entitled to the credit, according to the IRS.

Child Care Expenses

The Child Care and Dependent Credit offers working parents a break on daycare or nursery school tuition. The credit is not restricted to the parent claiming the child as a dependent. However, it is only available to custodial parents. To qualify for the credit, you must have paid child care expenses so that you could work, attend school full-time or seek employment. If you are married, your spouse will need to meet the same work requirements unless physically or mentally incapable of self-care. At the time of publication, you may deduct 35 percent of expenses paid, up to a maximum of $3,000 per child and a total of $6,000 for two or more children.

About the Author

Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies from the University of Central Florida.

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