Under federal law, the custodial parent is entitled to claim the dependency exemption on their tax returns, absent an agreement or Court Order to transfer the exemption to the non-custodial parent. The custodial parent may still claim head of household, earned income and dependent care credits even if the exemption is transferred to the non-custodial parent.
The dependency exemption may be claimed for a child under age 19 or, if the child is a full-time student, under age 24, regardless of the child’s income.
The “custodial” parent is the parent who has physical custody of the child for the greater part of the year. If the parents separated during the tax year, after having joint custody, the “custodial” parent is the parent who has physical custody of the child for the greater part of the rest of the year. If a child resides with each parent for an equal amount of time during the year, the parent with the higher adjusted gross income is treated as the custodial parent.
In Maryland, the Court has the authority to order the custodial parent to waive the dependency exemption and allow the non-custodial parent to claim the exemption.