Which is more beneficial -taking the EIC or claiming a child as a dependent?
I share custody of my daughter - at least 6 mos out of the year. Last year my ex claimed her as a dependent and I used the EIC. Should I profile the same path this year or would it be more beneficial to claim her as a dependent myself? Any advice is appreciated. Thanks!!Answers: Both... One doesn't preclude the other.
Does your divorce agreement specify who get to claim her as a dependent? If so, go beside what that says.
If not, you and your ex will own to work out which of you is claiming her for what, to make sure you don't both do duplicate thing and return with both of your returns rejected. At least as far as the IRS is concerned, you could claim both the exemption and the EIC -- but that doesn't appear very gala to your ex.
As for which is more beneficial -- just run the numbers both ways and see which works out best for you!
EIC expediency depends on how much earned income one have during the tax year. Too little or too much and the significance is reduced or eliminated. Too much investment income and it's lost.
You can integer your taxes both ways and go the means of access (EIC or dependency exemption) that works best for you.
Also remember that if you and your ex disagree in the adjectives (absent a provision in a divorce ruling which addresses the rates exemption), the IRS's tie-breaker rule favors the parent with whom the child lived the longest. That sounds approaching you this year.
Good luck!
Dear Terry,
This question depends on a few factors. First sour, the custodial parent is entitled to the dependent/exemption deduction. That is any you or your ex. Look at the divorce decree, it will report to you.
The EIC is typically the most beneficial since it is a credit (i.e. dollar for dollar offset to tax) as defiant a deduction. For example, if you be in the 15% rates bracket and you had an EIC of $1,000, that would be the equivalent of a $6,667 presumption or two exemptions. Put another way, surrounded by a 15% bracket, one exemption is equal to an EIC of $510. So, if you are getting more than this in credit, it is more prized than the exemption.
However, you may be entitled to both, you need to check on this. Also, at hand are requirements for the EIC as well that are compulsory such as:
earned income smaller quantity than $37,783, investment income under $2,900, child must be a qualified child: they must be your child, beneath age 19 or 24 if full time student and they must be in your residency for more than six months within the year.
If you are the custodial parent, you can claim the EIC and give your ex the exemption if you cram out a Form 8332 and give it to your ex to record with his/her return.
I hope this make sense.
Doctor K
You can do both if you want to.
If you claim her as a dependent, you might or might not get any duty savings depending on your income. If you are eligible for EIC you would categorically get something.
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