The IRS Child Tax Credit

What is a child tax credit?

The IRS Child Tax Credit can be applied to a parent or parents’ tax return if a child is being claimed as a dependent. There are eligibility guidelines that must be looked at when it comes to a parent being able to claim a child as a dependent as well as the ability to receive a tax credit for that child. The result of using a credit of any kind on your tax return is that you would reduce your liability on your federal income taxes. You may also be able to claim a credit for childcare services that you may avail yourself of but that is a different subject than the one we are going to talk about in this blog post. 

The IRS tax credit decreased to $2000 in 2022 after reaching a high of $3,600 in 2021. This is the amount for each child between the ages of six and seventeen (school-aged children, in other words). Your income may also play a role in whether this per child amount is decreased further. Typically, a family with a higher income would have this $2,000 per child figure reduced even more. 

Qualifications for the child tax credit- what are they?

There is a list of qualifications that a child must meet to qualify for the child tax credit. The child must be your son, daughter, or stepchild to qualify. Additionally, your grandchildren can potentially qualify you for the child tax credit. As we talked about earlier, the child must also be between the ages of six and seventeen. That child must not be working and providing for their well-being. The child must also have lived with you and your family for more than half of next year. Of course, if you have any questions about the eligibility of your child under this program then you should consult with a tax professional, tax attorney, or other person qualified to discuss matters like these such as a certified public accountant (CPA). 

Adopted children are treated the same as biological children in the eyes of the Texas Family Code as well as by the IRS when it comes to the child tax credit. There is a valid parent-child relationship that is created by the adoption. 

Who can claim the tax credit when parents get divorced?

A question that the attorneys with the Law Office of Bryan Fagan run into quite frequently in our line of work is what happens when two people get divorced- which parent is then able to claim the child tax credit for themselves moving forward? There are so many financial issues to sort out in connection with a divorce that a tax issue like this can often be overlooked. However, this is one of those sorts of issues that can be extremely important in the years following the divorce and needs to be one that you have a baseline level of knowledge concerning. That way you can adjust the way that you anticipate negotiating in the divorce itself.

It is important for any parent who has already gone through a family law case to understand that you need to read the court order that has been assigned to you to see what has been decided in your case. It could be that your family law case was so long ago that you cannot remember what your order says. If you need help reading the court order you should reach out to one of the family law attorneys with the Law Office of Bryan Fagan to look through the order and see what your rights may be. Having a copy of your court order handy in your home is a good idea moving forward. 

Some court orders may not say anything about the child tax credit situation. As we talked about earlier in this blog post this is a subject that could have been overlooked in your prior child custody case. If this is the case for you and your child you would need to go through the qualifications portion of the tax law and determine whether your child qualifies for the tax credit considering their age, living circumstances, and things of that nature. Again, please do not rely upon this blog post or anything you read on this website as being tax advice. You should always seek out professional help and guidance in a matter like this. 

If you claim your child for the child tax credit purposes and your co-parent believes that you should not have claimed your child in this way, then that is something that you would need to address directly with the IRS. You can send in a certified copy of your court order to the IRS for them to determine which parent should be able to claim your child for this tax credit. Unless you do this there is no stopping your co-parent from claiming your child for tax credit purposes. 

What can be negotiated in your child custody case?

When it comes to your divorce or child custody case then you and your co-parent can agree to a wide range of issues regarding the child tax credit and which of you will be able to claim your child for those tax purposes. Either you or your co-parent can be given the exclusive use of the child tax credit moving forward. This can be done as a part of your negotiations both for child custody and for community property division. Many moons ago I was told by an older, wiser attorney that at a certain point, a divorce becomes a business transaction. Of course, our attorneys never lose sight that you, your spouse, and your children are individual human beings with self-worth. However, looking at the case to move things around and negotiate is a worthwhile perspective. The child tax credit is one more poker chip on the table for you all to consider. 

Among the other options for you and your spouse to choose from were to alternate which parent can use the child tax credit from year to year. You could take odd years and your spouse could take even years or something similar. This would need to be spelled out in your final decree of divorce. Additionally, you would need to be able to make sure that you work with your attorney to make sure that doing this is what you want to do and is not something that you feel pressured into by your spouse or their attorney. Taxes are an area where people can often feel overwhelmed during a divorce because the subject matter can be difficult to comprehend. 

There are multiple ways to accomplish these goals. One is through informal settlement negotiations. This is done throughout the divorce or child custody case as you and your spouse work together to sort out any difficult issues together as a team. The other avenue to go down is to agree to something like this in mediation. Mediation is formalized settlement discussions with you and your spouse and a third-party mediator. You and your attorney can prepare for mediation together to be able to approach these subjects as well as possible. Preparation is the key to being able to come together to sort out complex subjects like this. 

What if you and your spouse do not agree to a resolution on this subject?

As it happens in a divorce case on occasion, you and your spouse may not agree on every issue in your divorce or child custody case. There are so many issues in play during a family law case that the two of you have ample opportunity to disagree to the point where no middle ground is found. Although most family cases do not proceed to a trial that does not mean that you can necessarily assume that your case will settle. With that said the issue of a child tax credit should certainly be considered as one of the topics that may result in you all requiring a trial after your case. 

The IRS child tax credit is a federal law that is handled in federal courts. Therefore, a state family court cannot issue any decisions or make rulings regarding which parent can utilize a child tax credit in upcoming years. If you go to trial the judge will issue a series of orders on child custody, conservatorship, visitation, and a host of other topics. However, if you want the language to be included in your final decree of divorce regarding the subject of the child tax credit then that will need to be something that you and your co-parent agree to in settlement negotiations or mediation. 

If you believe that your child qualifies for you to be able to claim a child tax credit on your taxes then you may do so on your tax return. As we mentioned earlier in today’s blog post this should be something that you sort out with your experienced tax professional. The attorneys and staff with our office can counsel you on how this issue relates to the field of family law and in your family law case but we are not going to be able to give you tax advice. 

As I’m sure you could imagine, it does occur where both parents after a divorce or child custody case will decide to claim their child on their tax return in hopes of receiving a tax credit for having done so. As we mentioned previously, if you think that your co-parent has claimed your child wrongfully on their tax return then you need to be prepared to directly address that subject with the IRS. A big issue would be whether the child resided with the non-primary conservator enough during the prior year to claim the child. If your child is utilized on your and your co-parent’s tax return in a single year, then the IRS will likely set your return to the side and attempt to sort that issue out with the two of you. 

Bear in mind that if you claim your child on your tax return incorrectly or if your child does not qualify for the tax credit, and the credit is issued anyways, then you will be in a position where the IRS will try and get that money back from you in the future. This is why we note that it is so important to work with a tax professional like a CPA or tax attorney so that you do not make any mistakes that end up having to be fixed months or oftentimes years later. The last thing you want to do is be told that you owe the IRS money when you don’t have the money to pay them back. Then you will need to work with them on a plan for paying back the money and that will not be a fun process. 

The child tax credit when you and your co-parent split custody

In some family law cases, the outcome of the case ends up being that both parents will share possession of their child in an even fashion. Applied to your situation this means that you would have possession of your child 50% of the time and your co-parent would have possession of your child 50% of the time. This is informally known as having split custody. Many parents seek this out as a goal for themselves and their child in a family law case. The way time, possession, and/or visitation is divided does not matter. All that matters for the sake of this discussion is that you and your co-parent spend roughly the same amount of time with your child during the year. 

The problem that you and your co-parent could both run into in a situation like this is that there could be a rare instance where your child does not reside with you or with your co-parent for more than six months out of the year. If your child also has some sort of order with the court that provides a grandparent with visitation during the year, then your 50/50 custody split could end up meaning that you only have your child living with you for five months or something like that. You and your co-parent should consider these possible outcomes and prepare for them before the conclusion of your family case. For example, you all may decide to include language in your decree which states which one of you can claim the child tax credit for a specific year. 

Final thoughts on taxes and divorce

Taxes as a general subject fall into a category having to do with finances and divorce. Sometimes the last thing that you want to do when you are going through an already difficult divorce is considered your finances, but I think that it is in your best interests to do so. Consider that if you do not plan for these things, you can be harmed a great deal in the future. Your household budget, among other things, will change somewhat after your divorce case ends. 

Planning for a divorce involves more than just thinking about how much time you want with the kids, what to do with the house, and things of that nature. Our attorneys and staff can tell you that the divorce may feel like it will last forever but the decisions that you make in your divorce are going to have profound impacts on the rest of your life. Beyond any issues with your children, you need to concern yourself with tax consequences from the perspective of someone who wants to be able to live within their means and provide for their family well. That means projecting what your income will be, determining a budget, and figuring out how to save money where you can. 

The child tax credit is only a small part of that topic, but it should not be one that you overlook. It is best to not justify inaction regarding any subject or area where you can save money due to having the mindset that there are more important things to concern yourself with. While that may be true you should not lose sight that there are several small ways to benefit yourself financially throughout the divorce. You don’t make up lost income, child support, or any other expense that comes out of your divorce in one big swing. Rather, it is a lot of smaller actions that add up to something significant which you need to look out for. This is how you can plan well for your life after a family law case.

Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan 

If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free-of-charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas family law as well as how your family’s circumstances may be impacted by the filing of a divorce or child custody case. 

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