Claiming child as a dependent in a Judgment of Divorce: is provision modifiable or not?

Family law practitioners often negotiate who will claim a child(ren) as dependent(s) in divorce or custody matters. However, not all practitioners specify whether this term would be subject to modification in the future. In the absence of a specific statement regarding modification of a child tax exemption provision, the association of the provision with child support or property settlement may dictate whether the provision is subject to the restrictions on modifications of property settlement agreements or the more liberal modification rules of child support arrangements.

The Michigan Court of Appeals has reasoned that the dependency exemption should normally be considered part of a child support award, not as part of property settlement, because the IRS rules provide for the parent with whom the child lived for the greater number of nights during the year to claim the exemption. The appropriate allocation of the exemption can increase the total disposable income and thus can be factored into an increase in a child support award. Clarke v Clarke, 297 Mich App 172; 823 NW2d 318 (2012); Fear v Rogers, 207 Mich App 642, 526 NW2d 197 (1994); Young v. Young, 182 Mich. App. 643, 646-667, 453 N.W.2 282 (1990).

State courts have the authority to award the dependency exemption for children of the marriage. Clarke v Clarke, 297 Mich App 172; 823 NW2d 318 (2012). And although the majority of the Court in Fear held that the parties are not precluded from designating the exemption as a property right allocated in their property settlement, Judge Hammond (concurring in part and dissenting in part) disagreed that the exemption could ever be a property settlement because the purpose of the exemption is to ease the tax burden borne by those who support dependents.

Based on this reasoning, the release of the dependency exemption by the parent who has physical custody should not be allocated on a permanent or indefinite basis through IRS Form 8332 Part 2. Instead, it should be determined on an annual basis through IRS form 8332 Part 1. Furthermore, the allocation of the exemption to a Payor of child support should be conditioned on there being no child support arrears.

Prudent family law practitioners should consider the consequences of the association of the child tax dependency exemption provision with child support or property related provisions and appropriately address it in their client’s Judgment of Divorce.

The information in this post is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Sterling Law or the individual author nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the reader’s licensing jurisdiction.