When child support is determined initially or modified, the Court can also decide who can claim the children as dependency exemptions on tax returns. According to Colorado law, the dependency exemption is allocated based on the parties’ financial contributions to the costs of raising the children.
This language in the Colorado child support statute has been interpreted to mean that the judge should allocate the dependency exemption based on the child support percentages shown in the child support worksheet, rather than the actual amount spent by each parent on the children. For example, if there is one child and a 75%–25% income split, the parent contributing 75% could get the deduction for the first 3 years and the other parent for the fourth year. But if the child support percentages change on a yearly basis, an annual review of the issue may be more appropriate than a long term plan for allocation of the exemption. A parent paying child support cannot receive the dependency exemption if that parent has not paid all court ordered child support for the tax year in question, or if it would not result in a tax benefit to that parent.
To accomplish the allocation, a parent may be required to sign and provide the other parent with a signed IRS Form 8332. The form can be downloaded from the IRS website at www.irs.gov.
For 2003, each personal exemption is $3,050.00. However, the value of claiming the children as dependency exemptions goes beyond the actual value of the exemption. Tax laws link the Under Age 17 Child Tax Credit to who actually claims the child dependency exemption on the tax return. Parents are advised to seek tax advice from a tax advisor such as a CPA or tax attorney, prior to making decisions about how to resolve dependency exemption issues in a child support case.