Note: The information below only applies to income tax returns for tax year 2017 and prior. The dependency exemption for 2018 and later years was repealed by Section 1003 of the 2017 Tax Cuts and Jobs Act, H.R.1.
The Colorado Child Support Guidelines, C.R.S. § 14-10-115(12), provides for the allocation between the parties of the right to claim dependent children as income tax exemptions.
The allocation is to be determined “in proportion to the contributions to the costs of raising the children.” What this usually means is that the court will use the amount of gross income for each parent shown on the child support worksheet to determine each parent’s proportionate share of the combined income of both parties to determine the allocation. For example, if one parent’s adjusted monthly gross income is $5,000 and the other parent’s adjusted monthly gross income is $10,000, the proportionate shares are 33.3% and 66.6% of the combined total adjusted gross income of $15,000.
Based upon the above example, the parent with 33.3% of the combined adjusted gross income would be allocated the income tax dependency exemption one out of every three years and the other parent with 66.6% would have two out of every three years.
The ability to take the income tax dependency exemption is conditioned upon (1) having paid ALL “court-ordered” child support for that tax year, and (2) receiving an actual tax benefit by taking the exemption. Note that the criteria for having paid all child support due for the year pertains to only to the tax year for which the dependency exemption is to be taken.
In situations where the person entitled to take the income tax dependency exemption is not the majority parenting time or custodial parent, it is good practice to have the other parent complete and provide the parent who is taking the exemption with the IRS Release of Exemption form. The IRS will typically hold up a refund when the other parent has already filed their tax return and claimed the child(ren) as an exemption. The IRS process is to allow the exemption(s) to the majority time parent unless there has been a release signed or they are provided with a court order. It is more practical to provide the IRS with a completed release of exemption form than to send a copy of the court order allocating the tax exemptions.
If the other parent filed their tax return and took the exemption(s), and they are not entitled to the exemption for that tax year by court order, the remedy is to request they file an amended tax return; and, if the other parent refuses to amend their tax return, bring the matter before the court in a contempt proceeding.
The information provided above is general in nature, is not intended as legal advice for your particular situation and should not be relied upon without first consulting with legal counsel.