The tax-exempt portion of income in case of co-parenthood
August 2022 – The proportion of your income that is exempt from tax depends, among other things, on the number of dependent children. Children with joint custody are dependent on both parents. The tax-exempt portion of your income is divided equally between the two parents, provided that there is also equal accommodation, and the tax authorities apply this condition very strictly.
The tax-exempt portion of income
Every taxpayer who receives taxable income in 2022 is entitled to a tax-exempt portion of the income of EUR 9 270. This basic tax-free quota is increased by:
1,690 for one dependent child;
4,340 for two dependent children
9 730 for three dependent children; and
15 740 for four dependent children.
An additional amount of EUR 6 010 is added for each dependent child beyond the fourth.
The tax-exempt portion of income is allocated to the lower tax scales first.
Example
A taxpayer with four dependent children is therefore entitled to a tax-free portion of income of 9 270 euros + 15 740 euros = 25 010 euros. And since the tax scales and tax rates for the 2023 tax year are as follows
- 0 euro - 13,870 euro => 25%;
- 13,871 - 24,480 => 40%;
- 24,480 - 42,370 => 45%;
- over 42,370 euros => 50%.
And since the tax-free portion of income is calculated from the lowest tax rate upwards, this means that the first euros of this taxpayer above the exempt amount of 25,010 euros will be taxed at 45%.
What about co-parenting?
The tax-exempt portion of income can only be granted once. In the case of a couple (married or legally cohabiting), this is not a problem, but it becomes one when parental authority is divided between the two parents. The tax authorities do, however, accept that the responsibility for the children in the case of joint parenthood should be divided between the two parents, each for half.
Example
Let us imagine a couple with two children. This couple is therefore entitled to an additional exempt portion of 4 340 euros.
- If parent A has custody of the children for 50% of the time, A receives a tax-exempt portion of income of 4 340/2 = 2 170 euros.
- If parent B has custody of the children the rest of the time, but in the meantime, B also has a child with another partner, B's tax-exempt share of income is
o for three children = 9,730 euros;
o minus half of the tax-exempt portion of income for the children with joint custody (-2,170 euros);
o total tax-exempt portion = EUR 7 560.
Conditions
In order to apply this division, certain conditions must be met:
the parents are no longer part of the same household;
both parents have a maintenance obligation towards the children;
it is their children. They are not their grandchildren or foster children;
they are joint children;
the accommodation of the children is divided equally between the two parents on the basis of:
o a registered agreement (free of charge) or an agreement approved by a judge (e.g. in the case of divorce by mutual consent). The agreement must explicitly state that the accommodation is divided equally and that both parents agree with the division of the exempt supplements (= tax clause); or
o a court decision that imposes equal sharing of accommodation.
Equally distributed housing
The tax authorities have always refused to investigate the reality of co-parenting, and more specifically the equal sharing of custody. It only accepts the division if an agreement or a court decision explicitly states that the children's accommodation is divided equally. But how far can you go? What can you do if the judge does not specifically use the words "equal sharing of custody"?
In a new circular, the administration has promised to be more flexible. In future, it will accept alternative formulations, but only if there is no doubt that the accommodation or residence of the children is divided equally over time between the two taxpayers.
The tax authorities will therefore also accept co-parenthood if the agreement or court decision imposes equal residence or equally divided residence or a regime of every other week (with a change on (day) to (hour)) or alternating residence (with a change on (day) to (hour)).
The mention in the agreements of co-parenting (in terms of residence), shared custody, dual residence or alternating residence is not sufficient to indicate a perfect (50/50) time division of custody of the children.
