Who claims the dependency exemption for the children?
This should be spelled out in your agreement. An analysis should be done to determine which parent derives the greatest tax benefit for the “family”. This way the overall cash available to the family is maximized due to the tax savings, which can then be utilized for meeting other cash demands. If your agreement is silent to this matter, then the custodial parent has right to the dependency exemption, assuming that both parents together provide more than half the support of their children. This could be waived by the custodial parent by signing Form 8332. In joint custody arrangements, the parent with more time with the child(ren) will have right to the exemption. For parents with children under age 17, this exemption can be quite valuable, because the child credit of $1,000 follows the dependent.
