Which statement is true regarding dependency exemptions for children?

The correct statement regarding dependency exemptions for children is that only one parent can claim a shared child. This is grounded in the tax rules established by the IRS, which state that only one taxpayer can claim a child as a dependent in a given tax year. This is particularly relevant for parents who are divorced or separated, as only one parent can receive the tax benefits associated with dependency exemptions for a shared child in any given year.

In situations where parents share custody, it is essential for them to determine who will claim the child as a dependent. Generally, the custodial parent (the one with whom the child lives for the greater part of the year) is permitted to claim the child unless they sign a release form allowing the non-custodial parent to claim the dependency exemption instead.

This understanding helps in correctly applying tax rules and maximally utilizing available exemptions. It is important to familiarize oneself with the IRS guidelines regarding dependency claims to ensure compliance and accuracy when filing taxes.