How Divorcing Couples Should Claim the Child Tax Credit

For parents going through a divorce, the issues involved in separating a household are numerous, ranging from property division and spousal support, to deciding how taxes will be paid the year the parties divorce. When children are involved, parents must decide whether child support should be paid by one parent to the other and, if so, they must calculate the amount of child support that will be paid.

Claiming the child tax credit is a related issue divorcing parents often face, because it impacts their overall income in a given tax year. And the rules have changed starting in 2021. In the past, a parent who claimed the child tax credit could claim $2000 per child as a credit on his, her, or their tax return. The amounts have changed for 2021, as has the way the credit is claimed.


Changes in the Child Tax Credit for Tax Year 2021

In 2021, the child tax credit for children ages 1-5 years old is $3,600. For children 6-17 years old, the credit is $3,000.

Additionally, the process for the Child Tax Credit has changed. The credit will be paid in periodic (maybe monthly) checks of $300 per child from July through December, rather than when the child is claimed on the tax return. The second half of the credit can be claimed when filing the 2021 tax return. The payments will go to the parent who claimed the child on the previous year’s tax returns. The Child Tax Credit eligibility for the 2021 tax year can be calculated using the filers’ 2019 or 2020 income. The credit phases out for parents earning above certain income levels.


Claiming the Child Tax Credit in a Divorce

In a divorce, parents often agree to share the child tax credit by alternating the person who claims the credit each year. For example, Parent A claims the child on returns for income earned in even numbered years (like 2020), and Parent B claims the child in odd numbered years.

When the upfront payments begin later this year, they will go to Parent A, based on the 2020 tax returns. Parent B will get some benefit when the 2021 return is filed, and will also get the upfront payments in 2022, assuming the Child Tax Credit continues. Over time, the amount each parent gets should more or less even out for most families.


Child Tax Credit Eligibility

To qualify under the 2021 Child Tax Credit expansion, a child must be under the age of 18 by December 31, 2021 and the income tax filer must have provided at least one-half of the child’s support during the last year. Also, the child must have lived with the tax filer for at least half of the year. The child also must have a valid social security number. As long as those requirements are met, the group of eligible children includes those who were adopted, stepchildren, foster children, grandchildren and nieces or nephews of the tax filer.


Warnings Regarding the Child Tax Credits

Finally – a warning. Right now, the advance payments and increased total credit amount are a benefit for 2021 only; it is unclear what will happen in 2022. And, while the Economic Stimulus checks need not be repaid if the IRS sent you too much, child tax credit advances may need to be (partially) repaid if overpaid.


Seek Professional Assistance for Your Divorce

As you can see, filing income taxes can be complicated, and accounting assistance is often helpful during the divorce process. The family law attorneys at Hawks Quindel have a network of accountants they engage to help divorcing parties sort out the economic impact of their divorce. Our attorneys also will provide accurate and personalized advice about minimizing the divorce’s economic impact to benefit both you and your family. Contact Hawks Quindel family law attorneys to discuss the specific details of your family’s situation.

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Marsha Mansfield
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