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 Rhode Island, as in other states, child custody arrangements and court orders can significantly impact financial responsibilities. Child support payments are determined based on state guidelines that consider the income of both parents and the needs of the child. Additionally, one or both parents may be required to provide health insurance for the child, with costs often factored into the child support calculation. Regarding tax implications, the IRS rules stipulate that the custodial parent, defined as the parent with whom the child spent the most nights during the tax year, is typically entitled to claim the child as a dependent. In cases where the child spends an equal number of nights with each parent, the parent with the higher adjusted gross income (AGI) is granted the right to claim the child. However, Rhode Island courts may include provisions in custody orders that allow parents to alternate years for claiming the child as a dependent on their taxes, which must be adhered to unless both parties agree to a change and it is approved by the court.