Do Doubled-Up Families Minimize Household-Level Tax Burden?

This paper examines households with children and at least two related tax filers to determine whether the household lowers income tax liability by optimally reassigning dependents among filers. Using a simulation strategy, we examine the dependent claiming that leads to the lowest income tax liability for a household, and ask whether multifamily households claim optimally. We find that taxpayers in multifamily households reassign dependents to filers as the payoff to doing so — in terms of either tax minimization or EITC benefit — increases; and that the propensity to reassign dependents is greater for EITC-eligible filers.