The start of a new year means taxes are just around the corner. For newly divorced parents, there could be some confusion about deductions and credits when it comes to taxes. Plus, what if you and your ex took advantage of the 2021 child advance tax payment?
Here is what you need to keep in mind before you finish your taxes and are surprised by the potential outcome.
To receive an earned income credit, you first must have an eligible child. An eligible child is someone who meets the following criteria:
- Age — the child must be either 19 years old or younger; 24 years old or younger and is a full-time student; or if the child is permanently disabled (regardless of their age).
- Residency — the qualifying child must have lived with you for at least half of the year.
- Relationship — the child must be related to you via your daughter, son, stepchild, adopted child, or foster child.
Additionally, a parent can not claim a child if their ex is also claiming the same child. Usually, this agreement is worked out during the divorce proceedings before a divorce is finalized. If a parent has sole custody of the child, then this wouldn’t be a concern. However, for parents who have joint custody, this is something that needs to be discussed.
One route parents who have joint custody take is taking turns claiming the child. For example, one parent may claim the child on even years while the other claims the child on odd years. Another suggestion is if there is an even amount of children — each parent could claim one child each year (but then would have to decide what to do once one of the children is no longer eligible to be claimed).
Child Tax Credit
The child tax credit is a credit given to parents if their child or children meet the following criteria:
- The child has a social security number;
- The child is 17 years of age or younger by the end of the year;
- You are claiming the child as your dependent; and,
- The child did not provide more than half of their own support throughout the year.
In 2021, child tax credit payments were given in advance to qualifying families who opted in for this advancement. This means that when it comes time to file taxes, half of the child tax credit that parents may be expecting will not be part of their return.
Questions About Deductions and Credits?
Filing taxes, especially after a divorce, can be complicated especially if children are involved. That’s why the team at Peterson White, LLP wants to take the stress away. When you talk to one of our Knoxville family lawyers, we will guide you through what to expect before you file your taxes.
Let our team take the worry away before tax season arrives — reach out today for a free consultation. (855) 919-4124