Domicile address of children remains important in the event of joint custody

Increasing numbers of children are growing up under joint custody arrangements. Even if the children live with each parent for the same number of days in the year, they cannot be officially resident at the address of both parents. The choice of domicile often makes a difference for tax purposes, for example for newly formed families.

Joint custody tax regime

Where a joint custody arrangement is in place, the parent on whom the children are dependent for tax purposes and at whose address they are therefore domiciled transfers half of the associated tax-free income allowances to the other parent. These tax allowances depend on the number of children.

In newly formed families, children in joint custody only count in the ranking system for tax-free income allowances in the family of the parent who transfers his or her half of the allowances.

Example of joint custody tax regime:

Jan and Leen split up a year ago. They have a four-year-old daughter, Olivia. Jan is legally cohabiting with his new girlfriend Katrien. Katrien has three children who are domiciled with her.

If Olivia is domiciled with Leen, 805 euros – half of the supplement of 1,610 euros for a first child (tax year 2020) – is awarded to Leen. The other half is transferred to Jan. This is added to the supplement of 9,290 euros for the three dependent children in his newly formed family. Jan therefore has a supplementary tax-free income allowance for 3.5 children of 10,095 euros (9,290 + 805).

If Olivia is domiciled with Jan, the same 805 euros will still be transferred to Leen, but Jan will receive a total supplementary tax-free income allowance of 15,030 euros (for four children) - 805 = 14,225 euros. This gives Jan an extra supplementary tax-free income allowance of 4,130 euros.

Discrimination persists in Flanders

Unless an amicable settlement is reached between the parents in a joint custody arrangement themselves, parents in Flanders still suffer discrimination in the area of reduction of property tax. The Flemish government has not yet eliminated this discrimination. This is because the application of the property tax reduction where there at least two dependent children is linked to the child’s domicile address – and hence to one of the two parents – even if the child spends an equal amount of time with both parents.