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 Indiana, as in other states, child custody arrangements and court orders can significantly impact financial responsibilities. Child support payments are determined based on the Indiana Child Support Guidelines, which consider the income of both parents, the number of children, and the time each parent spends with the children, among other factors. Health insurance for the child is typically required to be provided by one or both parents, and the cost may be factored into the child support calculation. Regarding tax implications, the IRS rules generally allow the custodial parent—the one with whom the child spent the most nights during the tax year—to claim the child as a dependent. However, if the child spends an equal number of nights with each parent, the parent with the higher AGI is entitled to the dependency exemption. Indiana courts may include provisions in custody orders that allow parents to alternate years for claiming the child as a dependent on their taxes, which should be adhered to unless IRS rules dictate otherwise. It's important for parents to consult with an attorney or tax professional to understand how these rules apply to their specific situation.