Taxes and Financial Aid

[2Mistakes]

What is the name of your state (only U.S. law)? MS

I have physical custody of mine and my ex-wife's 3 children. Child 1 is 17 yo, child 2 is 15 yo, and child 3 is 9 yo.

Per our divorce judgment, I claim child 1 every year, she claims child 3 every year, and we alternate claiming child 2 every other year.

Because child 1 has aged out of being eligible for Child Tax Credit/Additional Child Tax Credit, ex and I agreed that I could claim child 2 and she would claim child 1 on out 2010 returns, since ex isn't eligible for those credits but I am.

We still claimed the same number of children we were supposed to, we just switched which children it was. This resulted in a $1000 positive change on my taxes, but didn't affect her #s at all since she isn't eligible for the credits as the NCP.

We have agreed to do the same for 2011.

Child 1 will be applying for college and financial aid in 2012, and I know my 2011 tax return will be required. But if we do things as we've planned, I won't be claiming child 1 on my 2011 taxes, the ex will.

Will she be denied financial aid because I didn't claim her? Will they require mom's 2011 tax return since mom will be claiming her? That would probably result in a low amount of financial aid because mom makes A LOT of money.

She (child 1) lives with 12 months of the year and receives more than 50% of her support from me.

Does anyone know how this works?

 

[LillianX]

I don't know tax law enough to comment on that, so I'll leave it for someone else, but as for the financial aid, BOTH parents tax returns are taken into account when she fills out her FAFSA.

 

[TheGeekess]

If your parents have divorced or separated, provide information about the parent that you lived with most during the last 12 months. If you did not live with one parent more than the other, provide information about the parent who provided most of your financial support during the last 12 months.

Who is considered a parent?

Home - FAFSA on the Web-Federal Student Aid

 

[TheGeekess]

I don't know tax law enough to comment on that, so I'll leave it for someone else, but as for the financial aid, BOTH parents tax returns are taken into account when she fills out her FAFSA.

Nope.

 

[LillianX]

I was wrong!

 

[TinkerBelleLuvr]

Normally, it is based on the parent who they live with. So, FAFSA will look at 2mistake's and 2mistake's WIFE's income - NOT the NCP.

There are odd instances where they look at the other parent instead (had that in mine, but that's cuz the kid moved out and I landed up supporting her thru some $$ and medical insurance).

 

[LdiJ]

What is the name of your state (only U.S. law)? MS

I have physical custody of mine and my ex-wife's 3 children. Child 1 is 17 yo, child 2 is 15 yo, and child 3 is 9 yo.

Per our divorce judgment, I claim child 1 every year, she claims child 3 every year, and we alternate claiming child 2 every other year.

Because child 1 has aged out of being eligible for Child Tax Credit/Additional Child Tax Credit, ex and I agreed that I could claim child 2 and she would claim child 1 on out 2010 returns, since ex isn't eligible for those credits but I am.

We still claimed the same number of children we were supposed to, we just switched which children it was. This resulted in a $1000 positive change on my taxes, but didn't affect her #s at all since she isn't eligible for the credits as the NCP.

We have agreed to do the same for 2011.

Child 1 will be applying for college and financial aid in 2012, and I know my 2011 tax return will be required. But if we do things as we've planned, I won't be claiming child 1 on my 2011 taxes, the ex will.

Will she be denied financial aid because I didn't claim her? Will they require mom's 2011 tax return since mom will be claiming her? That would probably result in a low amount of financial aid because mom makes A LOT of money.

She (child 1) lives with 12 months of the year and receives more than 50% of her support from me.

Does anyone know how this works?

I am confused. An NCP IS eligible for the child tax credit and the additional child tax credit. Therefore I do not understand what happened here unless mom makes so much money that she is no longer eligible for those credits...in which case she makes a LOT of money.

You also need to think about educational credit. Those are far more valuable than the child tax credit and if mom makes too much money for the child tax credit she also makes too much money for the educational credits. Don't let those end up being wasted.

 

[2Mistakes]

I am confused. An NCP IS eligible for the child tax credit and the additional child tax credit. Therefore I do not understand what happened here unless mom makes so much money that she is no longer eligible for those credits...in which case she makes a LOT of money.

You also need to think about educational credit. Those are far more valuable than the child tax credit and if mom makes too much money for the child tax credit she also makes too much money for the educational credits. Don't let those end up being wasted.

Publication 972 (2010), Child Tax Credit

Qualifying Child
A qualifying child for purposes of the child tax credit is a child who:

Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew),

Was under age 17 at the end of 2010,

Did not provide over half of his or her own support for 2010,

Lived with you for more than half of 2010 (see Exceptions to time lived with you below),

Is claimed as a dependent on your return, and

Was a U.S. citizen, a U.S. national, or a U.S. resident alien. For more information see Publication 519, U.S. Tax Guide for Aliens. If the child was adopted, see Adopted child below.

Since the kids don't live with her, based on this I assumed that mom isn't allowed the child tax credit.

 

[TinkerBelleLuvr]

Child tax credit will run with the exemption since it's either mom or dad claiming the child.

With that said, at what age does child support in YOUR court order? 18 AND graduated from school?

What they are trying to say is that for the year 2012, when the child graduates from high school and goes to college, the EDUCATION credit will go to the parent CLAIMING the child, not the parent PAYING.

 

[2Mistakes]

Child tax credit will run with the exemption since it's either mom or dad claiming the child.

With that said, at what age does child support in YOUR court order? 18 AND graduated from school?

What they are trying to say is that for the year 2012, when the child graduates from high school and goes to college, the EDUCATION credit will go to the parent CLAIMING the child, not the parent PAYING.

CS in my state goes to age 21, regardless of being in school or not. So it looks like it will be in my best interests to keep claiming oldest child so that I can get the education credits, right?