Parents in a shared custody situation can each claim one child as a dependent; however, that doesn’t mean that both parents qualify for the Child Tax Credit. New payments begin in July with monthly payments through December and remaining payments being received as a tax refund next year. If you have children under the age of 18, then your payments could total as much as $3,600. So, who is eligible for this payment? Will parents who share joint custody of a child each receive Child Tax Credit payments?
1. Only One Parent Receives the Child Tax Credit Payments
Parents who share custody of a child cannot each receive the Child Tax Credit payments. Rather, only one parent can claim the Credit for a child. If you incorrectly claim a child this year, you may have to repay all or some of the payments received next year.
2. If You Owe Past-Due Child Support
According to the Congressional Research Service, the new Child Tax Credit law exempts the Child Tax Credit Payments being received this year from being seized to pay past-due child support. However, the amount you claim as a credit on your 2021 and 2022 income tax returns could be subject to being seized to pay past-due child support.
3. How Does This Work
Prior to the American Rescue Plan, if you were eligible to claim the Child Tax Credit, you received the credit when you filed your tax returns. Basically, the Credit reduced the amount of tax you owed for that tax year. Under the new law, all families who qualify will receive half the Credit this year through monthly payments starting in July and the second half of the Credit in 2022 when they file their 2021 income tax returns. If you only want to receive one check, the IRS will let you choose to receive the full payment when you file your tax returns.
4. Do You Qualify
The American Rescue Plan temporarily expands the Child Tax Credit from $2,000 per child 16 years old and younger to $3,600 for children age 5 and younger and to $3,000 for children age 17 and younger. If you have dependents ages 18 to 24 who are enrolled in college full time, you can receive $500 for each dependent.
5. What Amount Will I Receive
According to the Tax Policy Center, over 90% of families with children will receive an average benefit of $4,380. Half of this amount will be received this year and the remainder will be received next year when you file your 2021 income tax returns. If you want to find out how much you will receive, search for a “Child Tax Calculator For 2021” on Google and enter the information needed from your 2019 and 2020 income tax returns to calculate.
Should you need the advice of a divorce and child custody attorney or have questions or concerns about your situation, know that we are here to help and discuss those issues with you.