The Child Tax Credit and Divorce: How Does it Work?

Since March of 2020, the United States has been part of a worldwide pandemic due to the COVID-19 virus. Much of the world shut down because of how easily the virus spreads, meaning that many people lost their jobs and found themselves struggling financially. As a result of this financial hardship, the federal government has stepped in to provide cash assistance to qualifying citizens in the form of multiple stimulus checks and the Child Tax Credit. The qualifications around this tax credit are more complicated for parents of minor children who are now divorced.

What Exactly is the Child Tax Credit?

The Child Tax Credit can be claimed by parents that have dependent children up to age 17 while filing their taxes. The credit benefits parents by lowering the amount of federal taxes they owe over the course of the year. As of 2021, the Child Tax Credit was increased as part of the American Rescue Plan, delivering historic levels of relief for families in need due to the pandemic.

Thanks to this increase, families can receive anywhere from $2,000 to $3,000 for children older than six and $2,000 to $3,600 for children below the age of six. The amount will be split into monthly advances of up to $300 for children under the age of six and up to $250 per child older than six. The changes introduced in the American Rescue Plan also increased the age limit for this tax credit, so children up to age 17 can now qualify.

Can Divorced Parents Claim the Child Tax Credit?

Considering the significant increase the Child Tax Credit was given this year, it’s safe to assume it could lead to some conflict among divorced couples sharing custody of eligible children. However, there are some ground rules regarding the credit and taxes in general that may help ease the tension:

  • Only one parent can claim a child on their taxes in any given year
  • Therefore, the Child Tax Credit can only be claimed by one parent per child each year
  • The credit generally goes to the parent who retains custody for more of the year
  • 2020 tax filings will be used to gauge eligibility

If a parent claimed one of their children as a dependent on their 2020 taxes and that child meets the qualifications for the child tax credit, the payments will be made by the IRS to that parent. However, the parent that plans to claim the same child on their 2021 taxes is the parent who should be receiving the payment.

This complicates things because, if the parent receiving the payment isn’t the intended parent, they will be liable to repay the amount in the next tax season. If a parent is receiving the monthly payments from the child tax credit on behalf of a child they do not plan to claim when they file their taxes for 2021, they will have to reimburse the parent who didn’t receive them. The parent who does not plan to claim their child or children on their 2021 taxes should unenroll from the advance payments, which can be done on the IRS website.

Mitigating Conflict Regarding the Child Tax Credit

If you find yourself in a disagreement with your former spouse regarding the Child Tax Credit and who should be receiving it, there are a few avenues that can be taken to resolve the issue. In certain situations, parents can come to their own agreements concerning their specific case, which will then be solidified in their divorce proceedings or legal custody arrangements.

However, there are situations in which the level of tension or conflict is too high for the parents to resolve without mediation. In these instances, the conversations are usually had between lawyers on behalf of the parents in question, and any agreement will be presented to a court when made. The judge will either approve the arrangement or make their own determinations, which will be a part of the finalized court order.

Contact an Attorney Today

If you have concerns regarding the Child Tax Credit and whether you should be receiving it, contact Shaw Family Law, L.L.C. today. Navigating taxes and tax credits can be much more complicated with the addition of children and divorce. At Shaw Family Law, we will work tirelessly to plead your case and help resolve any conflict that may arise due to the increase in the Child Tax Credit. If you need to speak with a lawyer that has expertise in divorce-related issues, contact us at (205) 259-7650 or via this link today.