Divorce or Separation: Who Can Claim a Child as a Dependent on Taxes

Feb 12, 2025 | GTM Blog, Household Payroll & Taxes, Tax & Wage Laws

dependent-taxes-divorced

Navigating taxes after a divorce or separation can be tricky, especially if it’s your first time filing as a single individual. There are two key tax considerations for single parents.

First, we’ll clarify the rules around claiming dependents, including available tax breaks and eligibility requirements for claiming your child(ren).

Second, we’ll discuss the importance of paying your nanny legally and how this can provide additional tax benefits for qualifying parents.

Who is the custodial parent?

The custodial parent is the parent with whom the child lives most of the year. However, situations can become more complex when custody is shared equally between both parents. In these cases where the child spends equal time with each parent, the IRS has a tie-breaker rule. The parent with the higher adjusted gross income is then eligible to claim the child as a dependent.

What tax benefits come from claiming a dependent?

Several tax benefits can be available (if you are eligible) only to the custodial parent claiming the child(ren).

Child tax credit
- In 2025, the child tax credit is $2,000 per qualifying child
Head of household filing status
- To file this, you must maintain a home for a qualifying person, often putting you in a more favorable tax bracket.
Earned income tax credit
- You can possibly qualify for reduced taxes if you are the qualifying parent.
Child and dependent care tax credit
- This credit is given if you pay expenses for the care of the qualifying child to enable you to work or actively look for work.

Why Paying Your Nanny Legally Matters

The child and dependent care tax credit relies on paying your nanny legally. Paying legally also allows you to participate in a Dependent Care FSA (DCFSA), a pre-tax account you can fund to help pay for childcare costs for a child under 13. The contribution limit changes yearly; in 2025, it is $5,000. If you choose to pay “off the books” you don’t qualify for these benefits. Between the child and dependent care tax credit and a Dependent Care FSA, you can significantly reduce and possibly eliminate your nanny tax obligation.

GTM Can Help

To take advantage of benefits like the child and dependent care tax credit and a Dependent Care FSA, contact GTM. We can do back tax work to get you caught up on your nanny tax obligations. Then we can set you up to pay your nanny the right way so you’re compliant with tax, wage, and labor laws and can take advantage of tax-saving programs. Call us at (800) 929-9213 for a complimentary, no-obligation consultation with a household employment expert. Or schedule time with us at your convenience.