Publication 504 (2006), Divorced or Separated Individuals

Publication 504 - Main Contents

Table of Contents

Filing Status

Your filing status is used in determining whether you must file a return, your standard deduction, and the correct tax. It may also be used in determining whether you can claim certain deductions and credits. The filing status you can choose depends partly on your marital status on the last day of your tax year.

Marital status. If you are unmarried, your filing status is single or, if you meet certain requirements, head of household or qualifying widow(er). If you are married, your filing status is either married filing a joint return or married filing a separate return. For information about the single and qualifying widow(er) filing statuses, see Publication 501.

For federal tax purposes, a marriage means only a legal union between a man and a woman as husband and wife.

Unmarried persons. You are unmarried for the whole year if either of the following applies.

You have obtained a final decree of divorce or separate maintenance by the last day of your tax year. You must follow your state law to determine if you are divorced or legally separated.

Exception. If you and your spouse obtain a divorce in one year for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intend to remarry each other and do so in the next tax year, you and your spouse must file as married individuals.
You have obtained a decree of annulment, which holds that no valid marriage ever existed. You must file amended returns (Form 1040X, Amended U.S. Individual Income Tax Return) for all tax years affected by the annulment that are not closed by the statute of limitations. The statute of limitations generally does not end until 3 years after the due date of your original return. On the amended return you will change your filing status to single, or if you meet certain requirements, head of household.

Married persons. You are married for the whole year if you are separated but you have not obtained a final decree of divorce or separate maintenance by the last day of your tax year. An interlocutory decree is not a final decree.

Exception. If you live apart from your spouse, under certain circumstances, you may be considered unmarried and can file as head of household. See Head of Household, later.

Married Filing Jointly

If you are married, you and your spouse can choose to file a joint return. If you file jointly, you both must include all your income, exemptions, deductions, and credits on that return. You can file a joint return even if one of you had no income or deductions.

If both you and your spouse have income, you should usually figure your tax on both a joint return and separate returns to see which gives you the lower tax.

Nonresident alien. To file a joint return, at least one of you must be a U.S. citizen or resident alien at the end of the tax year. If either of you was a nonresident alien at any time during the tax year, you can file a joint return only if you agree to treat the nonresident spouse as a resident of the United States. This means that your combined worldwide incomes are subject to U.S. income tax. These rules are explained in Publication 519, U.S. Tax Guide for Aliens.

Signing a joint return. Both you and your spouse generally must sign the return, or it will not be considered a joint return.

Joint and individual liability. Both you and your spouse may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. This means that one spouse may be held liable for all the tax due even if all the income was earned by the other spouse.

Divorced taxpayers. If you are divorced, you are jointly and individually responsible for any tax, interest, and penalties due on a joint return for a tax year ending before your divorce. This responsibility applies even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns.

Relief from joint liability. In some cases, a spouse may be relieved of the tax, interest, and penalties on a joint return. You can ask for relief no matter how small the liability.

There are three types of relief available.

Innocent spouse relief, which applies to all joint filers.
Separation of liability, which applies to joint filers who are divorced, widowed, legally separated, or who have not lived together for the 12 months ending on the date on which election of this relief is filed.
Equitable relief, which applies to all joint filers who do not qualify for innocent spouse relief or separation of liability and to married residents of community property states who did not file joint returns.

Innocent spouse relief and separation of liability apply only to items incorrectly reported on or omitted from the return. If a spouse does not qualify for innocent spouse relief or separation of liability, the IRS may grant equitable relief.

Each of these kinds of relief have different requirements. You must file Form 8857 to request relief under any of these categories. Publication 971 explains these kinds of relief and who may qualify for them. You can also find information on our website at www.irs.gov.

Tax refund applied to spouse's debts. The overpayment shown on your joint return may be used to pay the past-due amount of your spouse's debts. This includes your spouse's federal tax, state income tax, child or spousal support payments, or a federal nontax debt, such as a student loan. You can get a refund of your share of the overpayment if you qualify as an injured spouse.

Injured spouse. You are an injured spouse if you file a joint return and all or part of your share of the overpayment was, or is expected to be, applied against your spouse's past-due debts. An injured spouse can get a refund for his or her share of the overpayment that would otherwise be used to pay the past-due amount.

To be considered an injured spouse, you must:

Have reported income (such as wages, interest, etc.) on the joint return,
Have made and reported tax payments (such as federal income tax withheld from wages or estimated tax payments), or claimed the earned income credit or other refundable credit on the joint return, and
Not be legally obligated to pay the past-due amount.

If the injured spouse's permanent home is in a community property state, then the injured spouse must only meet (3) above. For more information, see Publication 555, Community Property.

Refunds that involve community property states must be divided according to local law. If you live in a community property state in which all community property is subject to the debts of either spouse, your entire refund can be used to pay those debts.

If you are an injured spouse, you must file Form 8379 to have your portion of the overpayment refunded to you. Follow the instructions for the form.

If you have not filed your joint return and you know that your joint refund will be offset, file Form 8379 with your return. You should receive your refund within 14 weeks from the date the paper return is filed or within 11 weeks from the date the return is filed electronically.

If you filed your joint return and your joint refund was offset, file Form 8379 by itself. When filed after offset, it can take up to 8 weeks to receive your refund. Do not attach the previously filed tax return, but do include copies of all Forms W-2 and W-2G for both spouses and any Forms 1099 that show income tax withheld.

An injured spouse claim is different from an innocent spouse relief request. An injured spouse uses Form 8379 to request an allocation of the tax overpayment attributed to each spouse. An innocent spouse uses Form 8857 to request relief from joint liability for tax, interest, and penalties on a joint return for items of the other spouse (or former spouse) that were incorrectly reported on or omitted from the joint return. For information on innocent spouses, see Relief from joint liability , earlier.

Married Filing Separately

If you and your spouse file separate returns, you should each report only your own income, exemptions, deductions, and credits on your individual return. You can file a separate return even if only one of you had income. For information on exemptions you can claim on your separate return, see Exemptions, later.

Community or separate income. If you live in a community property state and file a separate return, your income may be separate income or community income for income tax purposes. For more information, see Community Income under Community Property, later.

Separate liability. If you and your spouse file separately, you each are responsible only for the tax due on your own return.

Itemized deductions. If you and your spouse file separate returns and one of you itemizes deductions, the other spouse cannot use the standard deduction and should also itemize deductions.

Table 1. Itemized Deductions on Separate Returns

This table shows itemized deductions you can claim on your married filing separate return whether you paid the expenses separately with your own funds or jointly with your spouse. Caution: If you live in a community property state, these rules do not apply. See Community Property.

IF you paid ...	AND you ...	THEN you can deduct on your separate federal return ...
medical expenses	paid with funds deposited in a joint checking account in which you and your spouse have an equal interest	half of the total medical expenses, subject to certain limits, unless you can show that you alone paid the expenses.
state income tax	file a separate state income tax return	the state income tax you alone paid during the year.
	file a joint state income tax return and you and your spouse are jointly and individually liable for the full amount of the state income tax	the state income tax you alone paid during the year.
	file a joint state income tax return and you are liable for only your own share of state income tax	the smaller of: the state income tax you alone paid during the year, or the total state income tax you and your spouse paid during the year multiplied by the following fraction. The numerator is your gross income and the denominator is your combined gross income.
property tax	paid the tax on property held as tenants by the entirety	the property tax you alone paid.
mortgage interest	paid the interest on a qualified home held as tenants by the entirety	the mortgage interest you alone paid.
casualty loss	have a casualty loss on a home you own as tenants by the entirety	half of the loss, subject to the deduction limits. Neither spouse may report the total casualty loss.

Dividing itemized deductions. You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse. See Table 1.

Separate returns may give you a higher tax. Some married couples file separate returns because each wants to be responsible only for his or her own tax. There is no joint liability. But in almost all instances, if you file separate returns, you will pay more combined federal tax than you would with a joint return. This is because special rules apply if you file a separate return. These rules include the following items.

Your tax rates will increase at income levels that are lower than those for a joint return filer.
Your exemption amount for figuring the alternative minimum tax will be half of that allowed a joint return filer.
You cannot take the credit for child and dependent care expenses in most cases.
You cannot take the earned income credit.
You cannot take the exclusion or credit for adoption expenses in most instances.
You cannot take the credit for higher education expenses (Hope and lifetime learning credits), or the deduction for student loan interest.
You cannot exclude the interest from qualified savings bonds that you used for higher education expenses.
If you lived with your spouse at any time during the tax year:
1. You cannot claim the credit for the elderly or the disabled,
2. You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received, and
3. You cannot roll over amounts from a traditional IRA into a Roth IRA.
Your income limits that reduce the child tax credit, retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions will be half of the limits allowed a joint return filer.
Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return).
Your basic standard deduction, if allowable, is half of that allowed a joint return filer. See Itemized deductions, earlier.

Joint return after separate returns. If either you or your spouse (or both of you) file a separate return, you generally can change to a joint return any time within 3 years from the due date (not including extensions) of the separate return or returns. This applies to a return either of you filed claiming married filing separately, single, or head of household filing status. Use Form 1040X.

Separate returns after joint return. After the due date of your return, you and your spouse cannot file separate returns if you previously filed a joint return.

Exception. A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent. The personal representative has one year from the due date (including extensions) of the joint return to make the change.

Head of Household

Filing as head of household has the following advantages.

You can claim the standard deduction even if your spouse files a separate return and itemizes deductions.
Your standard deduction is higher than is allowed if you claim a filing status of single or married filing separately.
Your tax rate usually will be lower than it is if you claim a filing status of single or married filing separately.
You may be able to claim certain credits (such as the dependent care credit and the earned income credit) you cannot claim if your filing status is married filing separately.
Income limits that reduce your child tax credit, retirement savings contributions credit, itemized deductions, and the amount you can claim for exemptions will be higher than the income limits if you claim a filing status of married filing separately.

Requirements. You may be able to file as head of household if you meet all the following requirements.

You are unmarried or “considered unmarried” on the last day of the year.
You paid more than half the cost of keeping up a home for the year.
A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. See Special rule for parent, on this page, under Qualifying person.

Special rules may apply for people who had to relocate because of Hurricane Katrina. For details, see Publication 4492.

Considered unmarried. You are considered unmarried on the last day of the tax year if you meet all the following tests.

You file a separate return.
You paid more than half the cost of keeping up your home for the tax year.
Your spouse did not live in your home during the last 6 months of the tax year. Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. See Temporary absences, later.
Your home was the main home of your child, stepchild, or eligible foster child for more than half the year. (See Qualifying person, beginning on this page, for rules applying to a child's birth, death, or temporary absence during the year.)
You must be able to claim an exemption for the child. However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rules described later in Special rules for divorced or separated parents under Exemptions for Dependents. The general rules for claiming an exemption for a dependent are shown later in Table 3.

If you were considered married for part of the year and lived in a community property state, special rules may apply in determining your income and expenses. See Publication 555 for more information.

Nonresident alien spouse. If your spouse was a nonresident alien at any time during the tax year, and you have not chosen to treat your spouse as a resident alien, you are considered unmarried for head of household purposes. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other requirements to file as head of household.

Keeping up a home. You are keeping up a home only if you pay more than half the cost of its upkeep for the year. This includes rent, mortgage interest, taxes, insurance on the home, repairs, utilities, and food eaten in the home. This does not include the cost of clothing, education, medical treatment, or transportation for any member of the household.

Qualifying person. Table 2 shows who can be a qualifying person. Any person not described in Table 2 is not a qualifying person.

Generally, the qualifying person must live with you for more than half of the year.

Table 2. Who Is a Qualifying Person Qualifying You To File as Head of Household? ¹

Caution. See the text of this publication for the other requirements you must meet to claim head of household filing status.

IF the person is your ...	AND ...	THEN that person is ...
qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests) ²	he or she is single	a qualifying person, whether or not you can claim an exemption for the person.
	he or she is married and you can claim an exemption for him or her	a qualifying person.
	he or she is married and you cannot claim an exemption for him or her	not a qualifying person. ³
qualifying relative ⁴ who is your father or mother	you can claim an exemption for him or her ⁵	a qualifying person. ⁶
qualifying relative ⁴ who is your father or mother	you cannot claim an exemption for him or her	not a qualifying person.
qualifying relative ⁴ other than your father or mother (such as a grandparent, brother, or sister who meets certain tests) ⁷	he or she lived with you more than half the year, and you can claim an exemption for him or her ⁵	a qualifying person.
	he or she did not live with you more than half the year	not a qualifying person.
	you cannot claim an exemption for him or her	not a qualifying person.

¹ A person cannot qualify more than one taxpayer to use the head of household filing status for the year.

² The term “qualifying child” is defined under Exemptions for Dependents, later. Note. If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of Divorced or Separated Parents under Exemptions for Dependents, later. If you are the custodial parent and those rules apply, the child is generally your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption.

³ This person is a qualifying person if the only reason you cannot claim the exemption is that you can be claimed as a dependent on someone else's return.

⁴ The term “qualifying relative” is defined in Table 3, later.

⁵ If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. See Publication 501.

⁶ See Special rule for parent for an additional requirement.

⁷ A person who is your qualifying relative only because he or she lived with you all year as a member of your household is not a qualifying person.

Special rule for parent. If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother does not live with you. However, you must be able to claim an exemption for your father or mother. Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly.

Death or birth. You may be eligible to file as head of household if the individual who qualifies you for this filing status is born or dies during the year. You must have provided more than half of the cost of keeping up a home that was the individual's main home for more than half of the year, or, if less, the period during which the individual lived.

Example.

You are unmarried. Your mother, for whom you can claim an exemption, lived in an apartment by herself. She died on September 2. The cost of the upkeep of her apartment for the year until her death was $6,000. You paid $4,000 and your brother paid $2,000. Your brother made no other payments towards your mother's support. Your mother had no income. Because you paid more than half of the cost of keeping up your mother's apartment from January 1 until her death, and you can claim an exemption for her, you can file as a head of household.

Temporary absences. You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, or military service. It must be reasonable to assume that the absent person will return to the home after the temporary absence. You must continue to keep up the home during the absence.

Kidnapped child. You may be eligible to file as head of household, even if the child who is your qualifying person has been kidnapped. You can claim head of household filing status if all the following statements are true.

The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family.
In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping.
You would have qualified for head of household filing status if the child had not been kidnapped.

This treatment applies for all years until the child is returned. However, the last year this treatment can apply is the earlier of:

The year there is a determination that the child is dead, or
The year the child would have reached age 18.

More information. For more information on filing as head of household, see Publication 501.

Exemptions

Generally, you can deduct $3,300 for each exemption you claim in 2006. You may be able to take an additional exemption amount if you provided housing to a person displaced by Hurricane Katrina. For more information, see Publication 4492.

If your adjusted gross income is more than $112,875, see Phaseout of Exemptions, later.

There are two types of exemptions: personal exemptions and exemptions for dependents. If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim his or her personal exemption on his or her own tax return.

Personal Exemptions

You can claim your own exemption unless someone else can claim it. If you are married, you may be able to take an exemption for your spouse. These are called personal exemptions.

Exemption for Your Spouse

Your spouse is never considered your dependent. You may be able to take an exemption for your spouse only because you are married.

Joint return. On a joint return, you can claim one exemption for yourself and one for your spouse.

If your spouse had any gross income, you can claim his or her exemption only if you file a joint return.

Separate return. If you file a separate return, you can take an exemption for your spouse only if your spouse had no gross income and was not the dependent of another taxpayer. If your spouse is the dependent of another taxpayer, you cannot claim an exemption for your spouse even if the other taxpayer does not actually claim your spouse's exemption.

Alimony paid. If you paid alimony to your spouse, you cannot take an exemption for your spouse. This is because alimony is gross income to the spouse who received it.

Divorced or separated spouse. If you obtained a final decree of divorce or separate maintenance by the end of the year, you cannot take your former spouse's exemption. This rule applies even if you provided all of your former spouse's support.

Exemptions for Dependents

You are allowed one exemption for each person you can claim as a dependent. You can claim an exemption for a dependent even if your dependent files a return.

The term “dependent” means:

A qualifying child, or
A qualifying relative.

Table 3 shows the tests that must be met to be either a qualifying child or qualifying relative, plus the additional requirements for claiming an exemption for a dependent. For detailed information, see Publication 501.

Table 3. Overview of the Rules for Claiming an Exemption for a Dependent

Caution. This table is only an overview of the rules. For details, see Publication 501.

•	You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer.
•	You cannot claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns.
•	You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico, for some part of the year. ¹
•	You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative.
	Tests To Be a Qualifying Child		Tests To Be a Qualifying Relative
1. 2. 3. 4. 5.	The child must be your son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. The child must be (a) under age 19 at the end of the year, (b) under age 24 at the end of the year and a full-time student, or (c) any age if permanently and totally disabled. The child must have lived with you for more than half of the year. ^2,3 The child must not have provided more than half of his or her own support for the year. ³ If the child meets the rules to be a qualifying child of more than one person, you must be the person entitled to claim the child as a qualifying child.	1. 2. 3. 4.	The person cannot be your qualifying child or the qualifying child of anyone else. The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you, in Publication 501, or (b) must live with you all year as a member of your household (and your relationship must not violate local law). ² The person's gross income for the year must be less than $3,300. ⁴ You must provide more than half of the person's total support for the year. ^3,5

¹ Exception exists for certain adopted children.

² Exceptions exist for temporary absences, children who were born or died during the year, children of divorced or separated parents, and kidnapped children.

³ Special rules may apply for people who were temporarily relocated because of Hurricane Katrina. For details, see Publication 4492.

⁴ Exception exists for persons who are disabled and have income from a sheltered workshop.

⁵ Exceptions exist for multiple support agreements, children of divorced or separated parents, and kidnapped children. See Publication 501.

Dependent not allowed a personal exemption. If you can claim an exemption for your dependent, the dependent cannot claim his or her own exemption on his or her own tax return. This is true even if you do not claim the dependent's exemption on your return or if the exemption will be reduced under the phaseout rule described under Phaseout of Exemptions, later.

You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year. For more information, see the instructions in your tax forms package.

Children of Divorced or Separated Parents

In most cases, because of the residency test (see item (3) under Tests To Be a Qualifying Child in Table 3, a child of divorced or separated parents will be a qualifying child of the custodial parent. However, if the child does not meet the requirements to be a qualifying child of either parent, the child may be a qualifying relative of one of the parents.

Special rule for divorced or separated parents. A child will be treated as the qualifying child or qualifying relative of his or her noncustodial parent if all of the following apply.

The parents:
1. Are divorced or legally separated under a decree of divorce or separate maintenance,
2. Are separated under a written separation agreement, or
3. Lived apart at all times during the last 6 months of the year.
The child received over half of his or her support for the year from the parents.
The child is in the custody of one or both parents for more than half of the year.
Either of the following applies.
1. The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. (If the decree or agreement went into effect after 1984, see Divorce decree or separation agreement made after 1984, later.)
2. A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2006 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during 2006. See Child support under pre-1985 agreement, later.

If the support of the child is determined under a multiple support agreement, this special rule for divorced or separated parents does not apply. See Multiple Support Agreement in Publication 501 for more information.

Custodial parent and noncustodial parent. The custodial parent is the parent with whom the child lived for the greater part of the year. The other parent is the noncustodial parent.

If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater part of the rest of the year.

Example.

Under the terms of your divorce, your child lived with you for 10 months of the year. The child lived with your former spouse for the other 2 months. You are considered the custodial parent.

Written declaration. The custodial parent must use either Form 8332 or a similar statement (containing the information required by the form) to make the written declaration to release the exemption to the noncustodial parent. The noncustodial parent must attach the form or statement to his or her tax return.

The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. If the exemption is released for more than 1 year, the original release must be attached to the return of the noncustodial parent for the first year, and a copy must be attached for each later year.

Divorce decree or separation agreement made after 1984. If the divorce decree or separation agreement went into effect after 1984, the noncustodial parent can attach certain pages from the decree or agreement instead of Form 8332. To be able to do this, the decree or agreement must state all three of the following.

The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support.
The custodial parent will not claim the child as a dependent for the year.
The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent.

The noncustodial parent must attach all of the following pages of the decree or agreement to his or her return.

The cover page (write the other parent's social security number on this page).
The pages that include all of the information identified in items (1) through (3) above.
The signature page with the other parent's signature and the date of the agreement.

The noncustodial parent must attach the required information even if it was filed with a return in an earlier year.

Remarried parent. If you remarry, the support provided by your new spouse is treated as provided by you.

Child support under pre-1985 agreement. All child support payments actually received from the noncustodial parent under a pre-1985 agreement are considered used for the support of the child, even if such amounts are not actually spent for child support.

Example.

Under a pre-1985 agreement, the noncustodial parent provides $1,200 for the child's support. This amount is considered support provided by the noncustodial parent even if the $1,200 was actually spent on things other than support.

Parents who never married. This special rule for divorced or separated parents also applies to parents who never married.

Special support rules for qualifying relative. The tests that must be met for treating a child as a qualifying relative include the support test (see item (4) listed under Tests To Be a Qualifying Relative in Table 3). The following special rules apply for determining whether the support test is met.

Alimony. Payments to your spouse that are includible in his or her gross income as either alimony, separate maintenance payments, or similar payments from an estate or trust, are not treated as a payment for the support of a dependent.

Remarried parent. If you remarry, the support provided by your new spouse is treated as provided by you.

Special test for qualifying child of more than one person. Sometimes, a child meets the relationship, age, residency, and support tests to be a qualifying child of more than one person. (For a description of these tests, see list items (1) through (4) under Tests To Be a Qualifying Child in Table 3.) Although the child is a qualifying child of each of these persons, only one person can actually treat the child as a qualifying child. To meet this special test, you must be the person who can treat the child as a qualifying child.

If you and another person have the same qualifying child, you and the other person(s) can decide which of you will treat the child as a qualifying child. That person can take all of the following tax benefits (provided the person is eligible for each benefit) based on the qualifying child.

The exemption for the child.
The child tax credit.
Head of household filing status.
The credit for child and dependent care expenses.
The exclusion from income for dependent care benefits.
The earned income credit.

The other person cannot take any of these benefits based on this qualifying child. In other words, you and the other person cannot agree to divide these tax benefits between you.

If you and the other person(s) cannot agree on who will claim the child and more than one person files a return claiming the same child, the IRS will disallow all but one of the claims using the tie-breaker rule in Table 4.

Table 4. When More Than One Person Files a Return Claiming the Same Qualifying Child (Tie-Breaker Rule)

IF more than one person files a return claiming the same qualifying child and ...	THEN the child will be treated as the qualifying child of the ...
only one of the persons is the child's parent,	parent.
two of the persons are the child's parents and they do not file a joint return together,	parent with whom the child lived for the longer period of time during the year.
two of the persons are the child's parents, they do not file a joint return together, and the child lived with each parent the same amount of time during the year,	parent with the higher adjusted gross income (AGI).
none of the persons are the child's parent,	person with the highest AGI.

Example 1—separated parents.

You, your husband, and your 10-year-old son lived together until August 1, 2006, when your husband moved out of the household. In August and September, your son lived with you. For the rest of the year, your son lived with your husband. Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, and support tests for both of you. At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the special rule for divorced or separated parents does not apply.

You and your husband will file separate returns. Your husband agrees to let you treat your son as a qualifying child. This means, if your husband does not claim your son as a qualifying child, you can claim your son as a dependent and treat him as a qualifying child for the child tax credit and exclusion for dependent care benefits, if you qualify for each of those tax benefits. However, you cannot claim head of household filing status because you and your husband did not live apart the last 6 months of the year. As a result, your filing status is married filing separately, so you cannot claim the earned income credit or the credit for child and dependent care expenses.

Example 2—separated parents claim same child.

The facts are the same as in Example 1 except that you and your husband both claim your son as a qualifying child. In this case, only your husband will be allowed to treat your son as a qualifying child. This is because, during 2006, the boy lived with him longer than with you. If you claimed an exemption, the child tax credit, head of household filing status, credit for child and dependent care expenses, exclusion for dependent care benefits, or the earned income credit for your son, the IRS will disallow your claim to all these tax benefits. In addition, because you and your husband did not live apart the last 6 months of the year, your husband cannot claim head of household filing status. As a result, his filing status is married filing separately, so he cannot claim the earned income credit or the credit for child and dependent care expenses.

Applying this special test under the special rule for divorced or separated parents. If a child is treated as the qualifying child of the noncustodial parent under the special rule for divorced or separated parents described earlier, only the noncustodial parent can claim an exemption and the child tax credit for the child. However, the noncustodial parent cannot claim the child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. Only the custodial parent can claim the child as a qualifying child for these four tax benefits.

Phaseout of Exemptions

The amount you can claim as a deduction for exemptions is reduced once your adjusted gross income (AGI) goes above a certain level for your filing status. These levels are as follows:

	AGI Level
	That Reduces
Filing Status	Exemption Amount
Married filing separately		$112,875
Single		150,500
Head of household		188,150
Married filing jointly		225,750
Qualifying widow(er)		225,750

You must reduce the dollar amount of your exemptions by 2% for each $2,500, or part of $2,500 ($1,250 if you are married filing separately), that your AGI exceeds the amount shown above for your filing status. However, beginning in 2006, you can lose no more than 2/3 of the dollar amount of your exemptions. In other words, each exemption cannot be reduced to less than $1,100.

If your AGI exceeds the level for your filing status, use the Deduction for Exemptions Worksheet, found in the instructions for Form 1040, 1040A, or Form 1040NR to figure the amount of your deduction for exemptions. However, if you are claiming an additional exemption amount for housing persons displaced by Hurricane Katrina, use Form 8914, Part II, to figure your deduction.

Alimony

Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. It does not include voluntary payments that are not made under a divorce or separation instrument.

Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Although this discussion is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony.

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