2021 Child Tax Credit (Advance Payment): A Guide For Divorced Or Separated Parents

On March 11th, 2021, the American Rescue Plan was signed into law by President Joe Biden. Among other things, the bill expands and makes “advanceable” the child tax credit. In effect, this means that parents with children under 17 years of age and younger will receive monthly payments from July of 2021 until December of 2021. In this blog post, our Houston and Galveston child support lawyers explain the key things that divorced/separated parents should know about the 2021 child tax credit.

2021 Child Tax Credit: An Overview

The United States has long had a child tax credit in place. The credit allows parents to deduct money directly from their total federal tax liability. As part of the American Rescue Plan’s COVID-19 response, the child tax credit has been temporarily expanded and made “advanceable.” The Internal Revenue Service (IRS) explains that the agency “will pay half the total credit amount in advance monthly payments beginning July 15.” Here is how the American Rescue Plan child tax credit works:

• Eligible families will receive a monthly payment of up to $300 per month for each child 5 years old or younger;
• Eligible families will receive a monthly payment of up to $250 for each child age 6 years old to age 17 years old; and
• Under current law, the policy is only in place for 2021—with payments being sent from July to December of this year.

The Parent Who Claims a Child on their 2021 Tax Return is Eligible for the Credits 

With the new, temporary child tax credit system in place, you may be wondering: How does the 2021 child tax credit work for divorced parents? The short answer is that the parent who claims a child as a dependent on their tax return for 2021 is the parent who is eligible to receive the credit.

As the 2021 tax returns have not been filed yet, the Internal Revenue Service is referring back to tax returns for 2020 to determine where to send the monthly child tax credit advance. Only one parent can claim the tax advance from the government—and the IRS will not split the payment in half.

In most cases, the parent who has primary custody of a child is the one who claims them as a dependent on their tax return. Though, for financial reasons, there are some divorced/separated couples who choose to do it the other way. 

Call Our Family Law Attorneys for Immediate Legal Support

At Lindamood & Robinson, P.C., our family lawyers have extensive experience assisting parents with a wide array of child support matters. If you have questions about the new child tax credit or child support in general, we can help. Contact our team to set up your initial family law consultation. With legal office locations in Houston, we provide family & divorce services to clients throughout Southeast Texas, including in Harris County and Galveston County.

Resource:

irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021