Tax Brake with Robert G. Nath, Esq.

Who must provide that support? One or both parents? It's both, so if both together provide more than half the support, that test is met. Sometimes another person (grandparent, for example) will provide support. If it's more than half, the support test is not met unless it's done under a “multiple support agreement.”

What if the child earns money on his/her own, or has other income? That does not matter, even if the extra income is high. What counts is who actually contributed to the support. For example, if Junior needs $5,000 per year for his support, Divorced Mom and Dad must contribute more than $2,500. If Junior has a $1 million trust fund, and uses no part of it for support, M&D still pass the support test. A specific rule in the tax code excludes scholarship money from the support test.

How do you value “support?” For cash items, it's of course the actual cash outlay. (Divorcing couples should keep very accurate receipts, down to the penny, for every item of support.) For non-cash items, such as housing, it's the fair rental value of the lodging. To prove that, you may consider scanning (and clipping) rental notices from the paper for similar properties, or any other method that proves the value of your lodging. Extras such as summer school, summer camp, outings, etc. are normally counted in support.

But even if Parent 1 provides 99.9% of support, Parent 2 can still claim the exemption in a divorce situation if Parent 2 is the custodial parent and other legal requirements are met. This is a special rule in the divorce context. Note that couples can agree to allocate the exemption to P1 or P2 by using Form 8332. The term “custodial” parent here means the parent having custody for the greater part of the calendar year. Again you need proof if there is an issue. Keep a log, notes, or anything else that makes sense.

So in all the chaos of divorce, it's wise to pay attention to the details.

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