The first step is to determine who is the custodial parent.
Under the IRS rules the custodial parent is the parent with whom the child lived greater part of the year. That is regardless what divorce document states and regardless of the agreement between spouses.
In general - the custodial parent is eligible to claim the child for all tax benefits.
If children are living equal number of nights with each parent - the custodial parent is the parent with higher AGI.
Please be aware that -- The custodial parent may release the claim to the noncustodial parent by signing the form 8332 -
- should be filed with the noncustodial parent s tax return.
In this case -
Please refer to the IRS publication 504 -
If a child is treated as the qualifying child of the noncustodial parent under the special rule or separated parents, only the noncustodial parent can claim an exemption and the child tax credit child.
However, the noncustodial parent cannot claim the child of household filing status, the credit and dependent care expenses, the exclusion care benefits, and the earned income credit. Only the custodial parent (or other eligible taxpayer) can claim the child as a qualifying child four tax benefits.