Claiming child as a dependent in a Judgment of Divorce: is provision modifiable or not?
Family law practitioners often negotiate who will claim a child(ren) as dependent(s) in divorce or custody matters. However, not all practitioners specify whether this term would be subject to modification in the future. In the absence of a specific statement regarding modification of a child tax exemption provision, the association of the provision with child support or property settlement may dictate whether the provision is subject to the restrictions on modifications of property settlement agreements or the more liberal modification rules of child support arrangements.
The Michigan Court of Appeals has reasoned that the dependency exemption should normally be considered part of a child support award, not as part of property settlement, because the IRS rules provide for the parent with whom the child lived for the greater number of nights during the year to claim the exemption. The appropriate allocation of the exemption can increase the total disposable income and thus can be factored into an increase in a child support award. Clarke v Clarke, 297 Mich App 172; 823 NW2d 318 (2012); Fear v Rogers, 207 Mich App 642, 526 NW2d 197 (1994); Young v. Young, 182 Mich. App. 643, 646-667, 453 N.W.2 282 (1990).
State courts have the authority to award the dependency exemption for children of the marriage. Clarke v Clarke, 297 Mich App 172; 823 NW2d 318 (2012). And although the majority of the Court in Fear held that the parties are not precluded from designating the exemption as a property right allocated in their property settlement, Judge Hammond (concurring in part and dissenting in part) disagreed that the exemption could ever be a property settlement because the purpose of the exemption is to ease the tax burden borne by those who support dependents.
Based on this reasoning, the release of the dependency exemption by the parent who has physical custody should not be allocated on a permanent or indefinite basis through IRS Form 8332 Part 2. Instead, it should be determined on an annual basis through IRS form 8332 Part 1. Furthermore, the allocation of the exemption to a Payor of child support should be conditioned on there being no child support arrears.
Prudent family law practitioners should consider the consequences of the association of the child tax dependency exemption provision with child support or property related provisions and appropriately address it in their client’s Judgment of Divorce.
About the Author
Agnes Jury started as an associate at Sterling Law in September 2015. She was voted in as President Elect of the GTLA Bar Association in 2016. Agnes mostly practices immigration law, family law, and estate planning. Agnes was born and raised in Poland. She immigrated to Montreal, Canada at the age of 12. In October of 2000, she immigrated to Chicago, Illinois where she attended law school and practiced law for seven years. In May of 2015, Agnes and her family moved to Traverse City, Michigan. She is fluent in Polish and French.