When parents separate they can both claim the Dependent Tax Credit for their child provided they meet the following criteria at any time during the tax year:
- They did not have a spouse or common-law partner or if they did they were not living with, supporting or being supported by that person;
- They lived with the dependent child in a home they maintained;
- They supported the child in that year; and
- The child is under the age of 18 or has a physical or mental impairment.
A problem arises however if parents have shared parenting of the child and one pays the other child maintenance based on the “set off” formula pursuant to the guidelines. In this case it is crucial that the separation agreement sets out that Parent A pays Parent B x and Parent B pays parent A y instead of simply saying one parent pay the other the difference.
The clause I use is as follows:
The parenting arrangements made with respect to the Children qualify as shared custody within the meaning of the Federal Child Support Guidelines in that the Children will reside with Parent A and Parent B equally and therefore child support is payable as follows by Parent A to Parent B resulting in a net payment of $____ per month payable by Parent A to Parent B:
- Commencing on the 1st day of the month and continuing on the 1st day of each month thereafter, Parent A shall pay to Parent B basic child support in the sum of $____ per month pursuant to his or her Guideline Income of $_______;
- Commencing on the 1st day of the month and continuing on the 1st day of each month thereafter, Parent B shall pay to Parent A basic child support in the sum of $____ per month pursuant to his or her Guideline Income of $______
This clause allows both parents to claim the Dependent Tax Credit as they are both “supporting” the dependent child.
Deborah A. Todd