Child Tax Credit and unique situation with parents

[jagilpin]

Both parents are custodial, as the children live together with both parents in the same house. However, parents are using the MFS status. Since the mother's income is below the filing threshold for MFS, the credit is being allowed. However, if these parents were to file MFJ, they are over income and the Child Tax Credit is disallowed. Has anyone experienced this before? The required due diligence questions posed for the tax preparer keeps asking if the non-custodial parent turned over the credit to the one claiming the credit for the children. There is no non-custodial parent in this case. Not sure how to proceed. Any help would be appreciated.

[Rapid Robert]

Both parents are custodial, as the children live together with both parents in the same house. However, parents are using the MFS status. Since the mother's income is below the filing threshold for MFS, the credit is being allowed. However, if these parents were to file MFJ, they are over income and the Child Tax Credit is disallowed. Has anyone experienced this before? The required due diligence questions posed for the tax preparer keeps asking if the non-custodial parent turned over the credit to the one claiming the credit for the children. There is no non-custodial parent in this case. Not sure how to proceed. Any help would be appreciated.

Your post doesn't make much sense. If someone is below the MFS filing threshhold, that means gross income was less than $4,050. Since the CTC AGI phaseout is $110K for MFJ and $55K for MFS, how could the other spouse be OK at MFS level, but suddenly go over the phaseout by adding no more than $4,050 gross income?

Also, a non-custodial parent can't release a dependency exemption and child tax credit to a custodial parent, it's the other way around. And as you say, they are both custodial parents, either one can claim the child, so no one has to release anything, as long as they both agree. If they don't agree, tie-breaker rules are followed.

[TaxGuyBill]

I think you meant the mother's income is below the phase-out amount for the Child Tax Credit, right?

If so, yes, that is allowed, and it probably the most common situation where MFS works out better than MFJ.

I agree with Rapid Robert, if the parents agree who claims the child, either parent can claim the child. There is not a non-custodial parent, so that question does not apply.