There are two code sections that specifically address the problems of filing status and dependency for persons who are separated or divorced by providing special rules in these situations that will override the general code provisions.
A married individual will be considered unmarried for tax purposes, including head of household filing status, if the requirements of Section 7703(b) are met. Section 7703(b) provides that if
an individual who is married and who files a separate return maintains as his home as a household which constitutes for more than one-half of the taxable year, the principal place of abode of a child (within the meaning of Section 151(c)(3)) with respect to whom such individual is entitled to a deduction for the taxable year under Section 151 (Allowance of deductions for personal exemptions) or would be so entitled but for Section 152(e)(2) (Exception where custodial parent releases claim to exemption for the year), or Section 152(e)(4) (Exception for certain pre-1985 instruments), and such individual furnishes over one-half the cost of maintaining such household during the taxable year, and during the last six months of the year, such individual’s spouse is not a member of such household, such individual shall not be considered as married.
That taxpayer can qualify under the more favorable head of household filing status’ tax rates.
Claiming dependency exemptions:
Section 152(e) provides a special support test in case of child of divorced parents.
Except as otherwise provided by Section 152(e)(2), 152(e)(3), or 152(e)(4), the custodial parent satisfies the support test for purposes of the personal exemption for the child (Sec. 152(e)(1)) if
1. a child receives over one-half of his support during the calendar year from his parents who are divorced or legally separated under a decree of divorce or separate maintenance, or who are separated under a written separation agreement, or who live apart at all times during the last six months of the year, and
2. such child is in the custody of one or both of his parents for more than one-half of the calendar year.
Then, such child is treated for purposes of determining support, as receiving over half of his support during the calendar year from the parent having custody for a greater portion of the calendar year ("the custodial parent").
There are three exceptions to the special rule of Section 152(e)(1) that deems support provided by the custodial parent:
1. The custodial parent releases the claim for the exemption (Sec. 152(e)(2)(A) and (B)) for current or future years by completing form 8332 (Sec. 152(e)(2)(A)), and the noncustodial parent must attach form 8332 to his return (Sec. 152(e)(2)(B)).
2. Multiple-support agreements (Sec. 152(e)(3)) establish who claims the dependency exemption, or
3. Pre-1985 Agreements provide the non-custodial parent the exemption and the non-custodial parent provides at least $600 of support. (Sec. 152(e)(4)).
The regulations and the court have defined custody to mean the custodial parent named in the agreement under the separation or divorce, but provide other instances where physical custody of the child will determine the custodial parent. The parent who actually has physical custody of the child for the greater period of the year does not necessarily get to claim the benefit of deemed support under these special support rules. At least one court decision has ruled under local law, a temporary support order is not a separation agreement and the special support tests do not apply.
Electing to Itemize:
The Service, in a Chief Counsel Advice to its Service Centers, has interpreted Code Section 7703(b) to imply that a spouse who qualifies as unmarried, does not loose the standard deduction if filing separately, even if the other spouse chooses to itemize. However the other spouse does loose the standard deduction if the spouse qualifying as unmarried elects to itemize. This is just opposite from the general rule (if neither qualifies as unmarried) that when a couple files separate returns, if one spouse itemizes the other must also.