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 Vermont, as in other states, child custody arrangements and court orders can significantly impact financial responsibilities. Child support payments are determined based on the income of the parents and the needs of the child, and Vermont courts use state guidelines to calculate the appropriate amount of support. 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 stipulate that the custodial parent, defined as the parent with whom the child spent the most nights during the tax year, is generally entitled to claim the child as a dependent. In cases where the child spends an equal number of nights with each parent, the IRS grants the right to claim the child as a dependent to the parent with the higher adjusted gross income (AGI). However, Vermont courts may include provisions in custody orders that allow parents to alternate years for claiming the child as a dependent on their taxes, which can override the default IRS rules if both parents agree and sign the appropriate IRS form.