south carolina child tax credit

Child Tax Credit for Parents Who Share Custody

The Child Tax Credit for the 2021 tax year provided relief to many parents across the country as COVID-19 continued to keep parents home from work, limit children’s social options, and cause widespread financial distress. However, this credit is unlike those offered in previous years, leaving many parents with questions. The credit can be especially confusing for those who split custody of their children.

Do you have questions about your child custody case or another family law matter? We’re here to help. Call Nowell Law Firm at 864-707-1785 to schedule a consultation now.

Know the Income Limits

While the vast majority of families have received/are receiving the Child Tax Credit in part or in full, it does have income limits. It begins phasing out at different income levels for those filing married, head of household, and single. For those filing single, the credit starts phasing out at $75,000 per year. This increases to $112,500 per year for head of household filers and $150,000 for those who are married filing jointly. The credit drops below $2,000 per child for married couples earning more than $400,000 and single filers earning more than $200,000. The credit decreases $50 for each $1,000 earned above these limits.

Which Parent Gets to File

Even if you have joint custody, both parents cannot claim the Child Tax Credit. It will be disbursed based on your 2020 tax filing. However, you must follow the terms of your divorce agreement. If you have an every-other-year filing schedule, this means that the person who claimed the child in 2020 may wrongfully receive the monthly payments. These payments will need to be paid back and may be taken out of your tax return.

Past Due Child Support

If the parent claiming the credit has past due child support, the monthly payments sent out in the second half of 2021 will not be used to catch up on arrears. However, the other half of the credit that is paid as part of the parent’s tax return can be seized and put toward the arrears.

How Much You Will Receive

The Child Tax Credit allows parents to get up to $3,600 per minor child. The credit is $3,600 for children who are five or younger at the end of 2021 and $3,000 for children who are six or older at the end of the year. Again, remember that the amount will begin to phase out if you are above the income limits given above.

The amount received is also dependent on whether or not you received monthly payments during the second half of 2021. By default, the IRS began sending out checks in the second half of the year each month. Those who opted out will receive the full amount on their 2021 tax return. Those who received monthly payments will receive half of the total amount on their tax return.

What About Next Year?

This year’s Child Tax Credit is substantially higher than it has been in previous years, which may seem unfair to the parent who does not get to claim the child for 2021. At this time, the tax credit is set to end after the 2021 tax year. It will then return to the standard tax credit. This is not yet set in stone, however, as legislators are attempting to reach a compromise that will renew the Child Tax Credit for 2022.

If the tax credit is renewed, remember to plan ahead for the 2022 tax year. If you receive the tax credit this year and will not receive it in 2022, opt out of monthly payments before the IRS deadline. Otherwise, you will be expected to pay that money back out of your 2022 tax return.

Choose Nowell Law Firm for Your Legal Needs

Changes in state and federal law can affect your divorce agreement in different ways. And if you are facing a divorce or custody action in the near future, having a strong legal team on your side can help you feel confident about the choices you make. If you are in South Carolina, call Nowell Law Firm at 864-707-1785 or contact us online to schedule a consultation to discuss your situation. We are ready to go to work for you!

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *