Some of the financial issues implicated by child custody arrangements and court orders are (1) child support payments; (2) payment for health insurance; and (3) the ability to claim the child or children as dependents for tax purposes. The Internal Revenue Service (IRS) rules dictate that the parent with whom the child spent the most nights during the tax year has the right to claim the child as a dependent. And if the child spends an equal number of nights with each parent during the tax year, the parent with the higher adjusted gross income (AGI) has the right to claim the child as a dependent. Sometimes the child custody court will order the parents to alternate years of claiming the child as a dependent.

In Arkansas, child custody arrangements and court orders often address financial responsibilities such as child support payments, healthcare costs, and tax exemptions. Child support is determined based on the income of both parents and the needs of the child, with guidelines set by state law to ensure consistency and fairness. The court may also order one or both parents to provide health insurance for the child. Regarding tax implications, the IRS generally allows the custodial parent—the one with whom the child spends the majority of nights—to claim the child as a dependent for tax purposes. If the child spends an equal amount of time with both parents, the parent with the higher AGI is entitled to the exemption. However, Arkansas courts can stipulate in the custody order that parents alternate years for claiming the child as a dependent, which overrides the IRS rule as long as both parents agree and sign the appropriate IRS form.