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George Saenz, the Bankrate.com Tax Talk columnistEarned income credit in a divorce scenario

Dear Tax Talk,
In 1996 I was divorced. In the decree, although I have full custody of both, my ex is allowed to claim one of our two children as his dependent. My question is, does this automatically keep me from being able to claim the child tax credit and EIC for this child? He does pay child support for both, but they live with me full time.

Thanks so much,
-- Michelle

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Dear Michelle,
I love to hate the earned income credit. The EIC is intended to benefit individuals with low income from wages or self-employment, but it has also been so abused that the rules are probably some of the most convoluted in the tax law.

Publication 596 describing the EIC weighs in at 58 pages.

There are basically 5 benefits associated with having a qualifying child:

If you and someone else have the same qualifying child, you and the other person can decide which of you, if otherwise eligible, will take all of the preceding tax benefits based on the qualifying child.

However, there is an exception for separated parents that would allow your husband to claim the exemption and the child tax credit, but not the other benefits, since he is not the custodial parent.

From Publication 596:

Lastly, from Publication 596: If the child is the qualifying child of more than one other person, only one of those persons (that's you) can claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, and the EIC.

That is, even though you do not claim an exemption for the other child, and you cannot claim the $1,000 child tax credit for the child claimed by your ex-husband, you can still claim that child for the EIC.

To ask a question on Tax Talk, go to the "Ask the Experts" page and select "taxes" as the topic.

Bankrate.com's corrections policy -- Posted: Oct. 20, 2006
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