Tax Resource Center

Claiming a child as a dependent when parents are divorced, separated or live apart

Parents who are divorced, separated, never married or live apart and who share custody of a child with an ex-spouse or ex-partner need to understand the specific rules about who may be eligible to claim the child for tax purposes. This can make filing taxes easier for both parents and avoid errors that may lead to processing delays or costly tax mistakes.

1. Only one person may be eligible to claim the qualifying child as a dependent;

2. Custodial parents generally claim the qualifying child as a dependent on their return;

3. Tie-breaker rules may apply if the child is a qualifying child of more than one person;

4. Noncustodial parents may be eligible to claim a qualifying child.

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If you are divorced with one child. Can you still qualify as head of household if your ex-spouse will claim your child as a dependent this year?

You may still qualify for head of household filing status even though you aren't entitled to claim your child as a dependent, if you meet the following requirements:

1. You're not married, or you’re considered unmarried on the last day of the year;

2. You paid more than half of the cost of keeping up a home, that was your home and the main home of your child for more than one-half of the year; and

3. Your child is your qualifying child for purposes other than the dependency exemption and the child tax credit.

Are bonuses taxable?

Yes, bonuses are considered supplemental wages and therefore are taxable. Whether you receive a bonus in the middle of the year or at the end, your employer must withhold 6.2 percent for Social Security tax and 1.45 percent for Medicare tax. Those are the same values they withhold from every paycheck you receive. Additionally, your employer must withhold federal and state income tax from your bonus.

Your employer can determine how much income tax to withhold in one of two ways: The first option is aggregate method. Your income tax withholding is calculated as if your bonus was added to one of your regular paychecks. The second option is flat percentage method. The IRS allows employers to simply withhold 22 percent from each employee’s bonus (not to exceed $1 million) for income tax. Anything you receive over $1 million is taxed at 37 percent.

What to do with an inherited IRA?

Depending on the capacity in which you’re receiving the inheritance, there are different options available to you and requirements to consider.

Inherited from spouse. If a traditional IRA is inherited from a spouse, the surviving spouse generally has the following three choices:

Treat the IRA as if it were your own, naming yourself as the owner.
Treat the IRA as if it were your own by rolling it over into another account, such as another IRA or a qualified employer plan, including 403(b) plans.
Treat yourself as the beneficiary of the plan.

Inherited from someone other than spouse. If the inherited traditional IRA is from anyone other than a deceased spouse, the beneficiary cannot treat it as his or her own. This means that the beneficiary cannot make any contributions to the IRA or roll over any amounts into or out of the inherited IRA.

What are the distribution rules for an inherited IRA?

Due to the Secure Act, which was signed into law in December 2019, most (but not all) IRA beneficiaries must deplete an inherited IRA within 10 years of the account owner's death. This applies to inherited IRAs if the owner died after Dec. 31, 2019.

There are some exceptions to the 10-year rule:

You inherited the IRA from your spouse. If it’s a Roth IRA, you don’t have to take any withdrawals in your lifetime. If it’s a traditional IRA, required distributions start when you reach age 72.

You’re a minor child. You must start distributions, but they’ll be figured based on your life expectancy. That rule applies only until you reach the “age of majority,” which in most states is 18. At that point, you have 10 years to withdraw the entire account.

You’re chronically ill or disabled. You can stretch the IRA distributions out over your lifetime.

You’re not more than 10 years younger than the account owner. Withdrawals can be stretched over your lifetime.

If you are a beneficiary of a Roth IRA, what are your options?

Your relationship to the original owner and the age of the account determine which options you have.

If you are inheriting a Roth IRA as a Spouse, you may:

Treat the Roth IRA as your own. you'll transfer the assets into your own new or existing Roth IRA. You'll be subject to the same distribution rules as if it had been yours to begin with. This option is only available if you're the sole beneficiary.

Open an Inherited Roth IRA in your name. You can spread out the distributions over your life expectancy (Life Expectancy Method) or you must withdraw all the assets from the account by Dec. 31 of the fifth year following the year of death (5-Year Method).

Lump-Sum Distribution. There's no tax on contributions in the account. But the earnings are taxable if the account was less than five years old when the original account owner died.

If you are inheriting a Roth IRA as a Non-Spouse, you may:

Open an Inherited Roth IRA in your name. You'll be subject to required minimum distributions. All distributions must be distributed within 10 years of the original owner's death (Life Expectancy Method) or 5 years of the original owner's death (5-Year Method).

Lump-Sum Distribution. Contributions are tax-free, but earnings are taxable if the account was less than five years old when the original account owner died.

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