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 Massachusetts, financial considerations in child custody arrangements include child support payments, healthcare costs, and tax implications. Child support is determined by state guidelines that consider the income of both parents, the number of children, and the custody arrangement. The court may order one or both parents to provide health insurance for the child, and the cost of insurance is typically factored into the child support calculation. Regarding tax deductions, 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. If the child spends an equal amount of time with both parents, the parent with the higher AGI is entitled to the deduction. However, Massachusetts courts can order parents to alternate the years they claim the child on their taxes. It's important for parents to adhere to the IRS rules and any specific court orders regarding tax exemptions to avoid legal complications.