A brief history
Until the Law of 3 August 2016, the joint parenting arrangement for tax purposes (fiscaal co-ouderschap) was limited to children who were still under parental authority. This meant that only the joint, non-emancipated underage children of both parents were eligible for joint parenting for tax purposes. Once a child is of age (or emancipated before that time) joint parenting for tax purposes could no longer be applied.
Legislative amendment and circular
A child who is of age, however, can actually be a greater financial burden on his or her parents: just imagine the costs of further studies or moving into lodgings, clothing and anything else. The authorities rightly found the situation unjustifiable and have amended the terminology of article 132bis of the Income Tax Code, the article governing joint parenting for tax purposes, through the Law of 3 August 2016. As of that time ‘jointly exercising parental authority over a child’ was scrapped and was replaced with ‘obligation to support a child’, as a result of which emancipated children or children of age are now also eligible.
In its circular dated 20 January 2017 the authorities discussed the time for which that obligation to support a child – as set out in article 203 of the Civil Code – runs. On the basis of this the joint parenting for tax purposes can be applied for emancipated minors as well as for children of age, for as long as the child’s education has not been completed by 1 January of the tax year and the other conditions for joint parenting for tax purposes are met. This amendment is applicable as of the 2017 tax year.
Real-world considerations: joint parenting for tax purposes versus deducting maintenance
The amendment is a positive move in every sense and has removed one of the sore points of joint parenting for tax purposes. When parents choose joint parenting for tax purposes, one must however not forget that maintenance cannot be deducted by the parent of whom the children are not dependants.
We have already noted that costs for supporting a child of age can be higher, which means it is possible that deducting maintenance is more appealing from a tax perspective than applying the joint parenting for tax purposes arrangement. Under joint parenting for tax purposes the tax-free sum is divided among both parents, but it only has an impact upon the lowest personal income tax rates. On the other hand, the deduction of maintenance (80% of the regularly paid maintenance) is a deductible expense that impacts the highest tax brackets.
Before opting en masse for deducting maintenance for children of age, we wish to express the following reservations. The flipside of the 80% deductibility of the maintenance is that 80% of the maintenance is also taxable for the recipient (the child) and it can affect whether the child of age is considered a dependant of the parent with whom he or she resides. One must here also take into account the income generated from student jobs (exceeding the initial exempted income bracket of €2,660 for the 2017 income year), which also counts as a net means of support in determining whether or not the child is a dependant.
A prior consultation and a calculation of the tax effects for all parties concerned (both parents and children) is thus highly recommended.