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Who Gets the Child Tax Credit in a Divorce

Typically, the custodial parent gets the Child Tax Credit, which is a federal tax credit. In general, the custodial parent is the parent who has physical custody of the child for most of the calendar year. A noncustodial parent can claim the credit if the parents signed an agreement to that effect or the noncustodial parent provided half of the child’s support. When both parents try to claim the Child Tax Credit, the first return filed will be accepted. So it is important to address this in your uncontested divorce in Jefferson County or wherever you get divorced if you are not the custodial parent. 

What is the Child Tax Credit? 

The Child Tax Credit is a tax benefit for each qualifying dependent child. The American Rescue Plan Act of 2021 (ARPA) expanded the Child Tax Credit. The 2021 benefit is $3,000 per child under age 18 or $3,600 per child younger than six. Child Tax Credit in Divorce

The 2021 Child Tax Credit is refundable. It will come to taxpayers in advance payments on a monthly basis, starting on July 15, 2021. The IRS will pay half the total credit amount in advance monthly payments. The filer will claim the other half when they file their 2021 income tax return. 

For example, say a parent got a Child Tax Credit of $3,600 for a child age 4 in 2021. The parent would receive $1,800 in advance monthly payments, spread out at the rate of $150 a month. $1,800 divided by 12 equals $150 a month. They would then receive the other $1,800 when they filed their 2021 tax return. 

A parent will need their 2020 tax return or their 2019 tax return if they did not file in 2020. They can still benefit from the credit if they are not working now or did not work in 2020. A parent can determine whether they qualify for the Child Tax Credit by using the IRS’s Advance Child Tax Credit Eligibility Assistant app. on their website. 

Earned Income Tax Credit (EITC)

The Earned Income Tax Credit is a tax credit for low to moderate-income earners. A parent is eligible for the EITC in 2021 if they earned between $15,980 to $57,414. Certain factors affect whether a parent can file for the EITC. These factors include the number of children the parent has and the parent’s earnings from investment income, which should be $3,650 or less.

The ETIC is different from the Child Tax Credit. A parent can claim both the Child Tax Credit and the Earned Income Tax Credit. A parent can use the IRS’s EITC Assistant app to see if they qualify for the EITC.

Claiming the Child Tax Credit and the EITC

Generally, only one person can claim a child as a qualifying child for the Child Tax Credit and the EITC. There is a special rule for divorced or separated parents or parents who lived apart in the last six months of the year. If the requirements of the special rule are satisfied, the noncustodial parent can claim the Child Tax Credit and the custodial parent can claim the EITC. A parent who falls into one of the above categories should read IRS Publication 596 with attention to the section on tiebreaker rules. There are also bankruptcy implications to getting a tax credit and so if you are planning to file for debt relief you should consult with your bankruptcy lawyer in Prattville or wherever you are located.

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