It can be incredibly challenging to go through a divorce in general, but it becomes much more complicated when you have children involved. In addition to figuring things out how you will handle custody and child support payments, there will be big changes to how divorce and custody impact your taxes. Here are a few key things that you need to know if you're going through the divorce process with children.
How Are Tax Credits Different These Days?
There have been recent changes where the government is now allowing you to claim half of your tax credits in the form of a monthly payment, which will continue until the end of the year. You'll be able to claim the other half of that credit on your taxes when you file. In addition, the child tax credit has been increased this year temporarily as part of the American Rescue Plan. While this is pretty straightforward for couples that are married with children, it becomes complicated for people that are divorced or separated.
Who Is Allowed to Claim This Tax Credit?
Part of handling your tax credit involves negotiating how to handle that tax credit since it can be handled however you want it to be as long as both parents agree. For example, if the parent with custody is receiving the child tax credit, the parent paying child support may have their child support payments temporarily lowered by that amount of the tax credit increase. The amount of the increase may also be split 50/50 between both parents to use as they wish on their child. It really depends on what the parents see is a fair way to handle it.
Does the Same Parent Get the Tax Credit Every Year?
There is no way to split up the child tax credit as it comes in since it will go to one parent if both are divorced. However, you can alternate who received the credit each year by claiming who will get to claim the child as a dependent. This is ideal for parents that have 50/50 split custody and are unsure how to deal with the tax benefits that come with having a child. Simply alternating who receives the credit can be an ideal solution that keeps things simple.
How Can a Lawyer Help?
Reach out to your family lawyer if you have questions about negotiating how taxes are handled after your divorce. Many of these decisions happen during mediation, which is when both parties try to work out an agreement on how to handle things without going to trial. A divorce lawyer can help come up with a solution to dealing with the tax implications of your divorce, which include handling the child tax credit complications.
Share10 September 2021
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