The dependency exemption for qualifying children of divorced or separated parents will usually go to the parent who has primary custody of the children for the calendar year. The custodial parent is determined by the number of nights that the children lived with the parent. When the children spend an equal amount of time with each parent, the parent with the higher adjusted gross income is allowed to claim the dependency.
A custodial parent may give up his or her claim to the dependency exemption to the noncustodial parent, provided four requirements are met.
First, the qualifying child must have received over one half of his support during the calendar year from his parents, who are either divorced, legally separated, or have lived apart during the last six months of the calendar year whether or not they were actually married.
Second, the qualifying child must have been in custody of one or both parents for more than one-half of the calendar year.
The third requirement is that the custodial parent must sign an unconditional written declaration on IRS form 8332 that he or she will not claim the dependent for any taxable year. A court order or decree, or a separation agreement will not be treated as a release. The release must state the name of the noncustodial parent to whom the exemption is released, and the years in which the release is effective.
The fourth, and perhaps most important, requirement is that the noncustodial parent must attach that written declaration to his or her tax return for each year in which the children are claimed as a dependent.
If all of the above conditions are met, the non custodial parent may claim the dependency exemption, the child tax credit, and any education credits attributable to educational expenses paid for the children by the non custodial parent. The custodial parent, however, may still file as head of household and claim the dependent care credit and earned income credit.

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