tax law question?

Question

I have 3 children. I'm divorced. I pay the child care expenses for 2 of them.But their mother takes them as a deduction. My accountant tells me that because she takes the deduction I can't deduct the child care. I also pay her child support which I know is not tax deductable. Is there any way to get around this/Know anyone who can help me with this?

Answer 1

Unfortunately, the only person who can claim any child care or "day care" is the one claiming the dependency. The only way around it is to claim that child as yours for dependency. It is up to the divorce proceedings as to who can claim whom. However, if it isn't clear, and if your ex is willing, you can claim one or two for yourself. Sometimes, the person claiming the children really doesn't benefit much from claiming them all. Usually, the first two kids give the most benefit. Beyond that, the benefit may be very small or non-existant. This is because things like Earned Income Credit only apply to the first 2 children. If her income is relatively low (less than $30,000 or so), she probably benefits very little from the 3rd child, whereas you may benefit greatly from claiming that child. You won't get the EIC (unless you live with that child for at least 183 days in a year), but you will (probably) get the child tax credit, the personal exemption, and any day care credit. This could add up to over $2500 in tax relief. Make a deal with the mother. Tell her you'll split it or something. But the big thing is, make sure she really knows what that third child is doing for her tax situation. Tell her to redo her 2005 taxes with only 2 children and see what happens to her refund. If it changes less than the amount you benefit, you are collectively "throwing money down the drain".

Answer 2

There are special rules for divorced parents that may allow on parent to claim the dependent deduction and he other to claim child care costs. As I read the rules, you must be the custodial parent to claim child care costs. The IRS links below should help.

Answer 3

First off, your CPA is correct. This matter should have been been in the divorce decree, which should tell you how much you need to pay in child support vs. alimony and who gets to claim the children on their returns. If you're giving her child support, why are you also paying for the child care? Shouldn't that be included in the child support? Maybe you should increase the alimony paid (if any) to your-ex for the amount you're paying in child care, that will lower you taxable income.