Tax season is complicated enough, but when you add a separation or divorce into the mix, the questions multiply. Who gets to claim the children? Can we both file as Head of Household? What happens if our settlement agreement says one thing, but the IRS says another?
In Maryland, the way you handle divorce and taxes can significantly impact your bottom line. Understanding the “default” rules—and how to legally override them—is the key to avoiding an IRS audit and maximizing your post-divorce budget.
The “Custodial Parent” Rule
The IRS has a very specific definition of who is entitled to claim a child as a dependent. By default, the custodial parent—defined as the parent with whom the child lived for the greater number of overnights during the year—is the one eligible to claim the child for tax purposes.
If you have a true 50/50 split (365 nights don’t divide evenly!), the IRS uses a “tie-breaker” rule: the parent with the higher Adjusted Gross Income (AGI) is typically deemed the custodial parent for tax purposes.
Dependency Exemptions vs. Tax Credits
While “exemptions” were significantly altered by the Tax Cuts and Jobs Act, the right to claim a dependent still unlocks several high-value benefits, including:
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The Child Tax Credit (CTC): Worth up to $2,200 per child for the 2025-2026 tax years.
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Credit for Other Dependents: For older children or adult dependents.
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Head of Household Filing Status: This offers a higher standard deduction and lower tax rates than filing “Single.”
How to Share or Alternate: The Power of IRS Form 8332
Many Maryland parents choose to alternate who claims the children each year, or if they have multiple children, they may each claim one. To do this legally when the child doesn’t live with the non-custodial parent for more than half the year, the custodial parent must sign IRS Form 8332.
This form “releases” the claim to the non-custodial parent. Crucial Tip: A divorce decree or court order is not enough for the IRS. Even if your Maryland court order says you get the exemption, the IRS will reject your return unless the signed Form 8332 is attached.
What Stays with the Custodial Parent?
Even if you sign Form 8332 to give the Child Tax Credit to the other parent, certain benefits always stay with the parent where the child actually lives:
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Head of Household Status: You cannot “give” this away via a form; you must meet the residency requirements.
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Dependent Care Credit: Used for daycare or after-school care expenses.
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Earned Income Credit (EIC): This stays with the parent who has physical custody for more than half the year.
Plan Ahead with the Right Tools
Taxes are one of the biggest “drama” triggers in post-divorce life. To avoid a mid-April meltdown, you need to be organized.
Check out our Jacobson Family Law Stan Store for resources designed to take the guesswork out of your divorce finances:
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The Divorce Finance Kit: Everything you need to track assets, support, and tax-related details so you’re ready for your accountant.
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The Mediation Success Kit: Includes strategies for negotiating tax provisions in your settlement agreement so there are no surprises later.
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Get These Worksheets Now!: Instant-download worksheets to help you calculate the financial impact of your filing status.
Final Thoughts
The best way to handle taxes after a Maryland divorce is to address them clearly in your Marital Settlement Agreement. By deciding now who claims which child (and in which years), you prevent future conflict and ensure both parents can plan their finances with certainty.
Need help navigating the financial side of your separation? At Jacobson Family Law, we help Maryland families find “Drama-Free” solutions to complex legal and financial questions.
