New Tax Rules for Child Dependency Exemptions of Divorced or Separated Parents or Parents Who Live Apart

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Final regulations describe new rules for claiming child dependency exemptions for divorced or separated parents, or parents who live apart. The regulations are effective for tax years beginning in 2009, culminating a process started in 2004 to clarify and update a troublesome area of tax. Confusion abounded under the old and temporary regulations. No clear explanation of how the custodial parent was determined existed and local courts had the right to over-rule federal tax law. In response to the public’s concern, proposed regulations were issued in 2007 and after public comment, final regulations were issued in July 2008. The changes are significant and affect many taxpayers.

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