During a divorce, it’s necessary to pay attention to your financial and tax planning because some changes are likely to impact your future income and expenses. For instance, if you are a divorced parent who shares custody of your child with the other parent, the question that comes to the forefront is who between you can claim child tax credit on your tax return? The short answer is – only one of you can.
Child Tax Credit for Parents with Shared Custody – What You Need to Know
According to the IRS, even if a divorced couple has a shared or joint custody arrangement, only one of them is eligible to receive advance child tax credit payments and claim the child tax credit on their tax return. Correlating with this, you need to discuss it with the other parent and decide who gets to claim child tax credit this year.
It should be noted that the IRS disbursed advance child tax credit payments to eligible parents between July and December 2021. Depending on who claimed child tax credit on their 2020 tax return, either you or the other parent would have received these payments.
If you received the payments, and if the other parent is the one who is going to claim child tax credit this year, you need to repay the payments you received while filing your tax return this year. Similarly, if the other parent received the payments, and if you are the one who is going to claim child tax credit this year, they need to repay the payments while filing their tax return this year.
This is because only those who claim child tax credit are eligible to receive advance payments. Furthermore, if the other parent is the one who is going to claim child tax credit, you can choose not to receive the advance payments by visiting the Child Tax Credit Update Portal (CTC UP). Similarly, if you are the one who is going to claim child tax credit, the other parent can do the same as well. It can save you the trouble of receiving the payments and then paying them back while filing your return.
At the same time, if one parent fails to update their information on the CTC UP to opt out of advance payments, it will not have any impact on the other parent’s eligibility to claim child tax credit on their tax return.
Eligibility Criteria for a Qualifying Child in 2022
You or the other parent can only claim child tax credit if you have a child who is under the age of 18 and lives with you (or the other parent) for at least six months in a given tax year. The child can be your biological child or adopted child, as long as they are claimed as your dependent. You can find the full list of eligibility criteria for a qualifying child here.
Advance Child Tax Credit Payments Are Not Taxable
It’s vital to note that advance child tax credit payments are not considered income and you are not required to pay tax on them. However, if the advance payments you receive in a given year are more than the amount of child tax credit that you are eligible to claim on your tax return, you have to repay the difference (the amount you received minus the amount you are eligible to claim) while filing your tax return.
Deciding Who Gets to Claim the Child Tax Credit
Parents in a shared or joint custody arrangement might find it difficult to decide who gets to claim child tax credit, since they both play an equally important role in their child’s life. However, with the help of an experienced Alabama family law attorney, you can work out an arrangement which is best suited for your needs.
It is extremely common for parents in a shared or joint custody arrangement to claim child tax credit on a rotation basis. For instance, you can claim child tax credit this year and the other parent can opt out of advance payments. Next year, the other parent can claim child tax credit and you can opt out of advance payments.
An experienced family law attorney can take your situation – as well as the other parent’s situation – into consideration and come up with an arrangement that can benefit both of you.
Experienced Family Law Attorneys in Opelika, Alabama
The family law attorneys at Alsobrook Law Group are committed to providing personalized legal advice and a high level of legal representation to the residents of Alabama. From divorce to child support, we can handle a wide variety of family law related cases. We also have a large network of experts – including tax professionals – who can help you understand the tax implications of the decisions you make during and after the divorce.
If you have any questions about child tax credit or any other divorce-related tax or financial issue, call our firm today at 334-737-3718 or contact us online and schedule a free consultation.