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Divorce and the 2021 child tax credit

| Jun 14, 2021 | Child Custody & Parenting Time

Many parents in Westchester County are eagerly anticipating the federal child tax credit payments that are due to start in mid-July. But for divorced parents the child tax credit can be a thorny issue.

What is the American Rescue Plan Act?

The American Rescue Plan Act was signed into law in March 2021. Under this plan, the child tax credit increased to $3,000 annually per child between the ages of six and 17 for tax year 2021 and $3,600 annually per child under age six for tax year 2021. Under the Act, the Internal Revenue Service will send advance payments of up to 50% of the credit due to taxpayers periodically starting in July. However, this could cause issues for divorced parents.

Divorced parents and the child tax credit

Per the IRS, each child can only be claimed as a dependent by one taxpayer. When parents are divorced generally the parent who has custody for most of the time claims the child tax credit. Some couples may agree to a 50/50 custody arrangement. In such cases the parent with the greater income generally claims the child tax credit. And some couples decide on their own who is to get the child tax credit which years in their divorce settlement.

The problem lies in the fact that the IRS will start sending benefits to whichever parent claimed the child as a dependent in 2020. This could affect those who share custody or alternate years to claim the credit. Basically, this means that one parent could get the child tax credit two years in a row which may go against their child custody arrangements. It is hoped that the IRS will provide further guidance on this issue.

Learn more about child custody in New York

The child tax credit can be a sticky issue for divorced parents in New York, but hopefully further information on how they can handle it will be forthcoming. This post is for educational purposes only and does not contain legal advice. Our firm’s webpage on child custody may be of interest to those who want further information on this topic.