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The IRS Child Tax Credit offers valuable tax relief for parents, but many are unaware of how divorce and custody arrangements can impact who gets to claim it. The rules can be confusing—especially in cases where parenting time is shared or joint custody is in place. Missing out on this credit could mean forfeiting thousands of dollars in potential savings. That’s why it’s essential for divorced or separated parents to fully understand how IRS Child Tax Credit eligibility works, what the IRS requires after a divorce, and how to avoid common filing mistakes. With the right knowledge and planning, parents can ensure they maximize this important financial benefit.
Understanding the Child Tax Credit
The IRS Child Tax Credit helps parents lower their federal income tax when they claim a child as a dependent. To qualify, a child must meet specific eligibility criteria. Using tax credits can reduce what a parent owes to the IRS, and in some cases, they may even receive a refund.
The credit amount changed over the years. In 2021, parents could claim up to $3,600 per child due to pandemic-related relief. In 2022, the credit returned to $2,000 per child between the ages of six and seventeen. Income level affects the exact amount parents receive, with higher earners getting reduced credits.
Parents may also be eligible for additional tax credits related to childcare, but those are separate from the Child Tax Credit.
Who Qualifies for the Child Tax Credit?
Basic Requirements for Eligibility
A child must meet several requirements to qualify for the credit, including:
- The child must be biological, adopted, or a stepchild of the person claiming them.
- Grandchildren may also qualify if they meet the dependency requirements.
- The child must be between six and seventeen years old by the end of the tax year.
- The child cannot support themselves financially.
- The child must have lived with the parent for at least half the year.
Adoption and Parent-Child Relationships
Adopted children receive the same treatment as biological children under both Texas Family Code and IRS regulations. Once adoption is finalized, the parent-child relationship qualifies for tax benefits, including the Child Tax Credit.
Child Tax Credit and Divorce: Who Claims It?
One of the most common concerns divorced parents have involves who gets to claim the Child Tax Credit. Many financial matters need sorting out in a divorce, and tax credits often get overlooked. However, claiming the credit can significantly impact a parent’s tax situation.
Checking Your Court Order
Parents who have been through a custody case or divorce should first review their court order to see if it specifies who gets to claim the Child Tax Credit. If the case took place long ago, a parent may need help understanding the legal language in their documents. A family law attorney can review the order and clarify any tax-related provisions.
When No Agreement Exists
Some court orders do not specify who can claim the tax credit. In such cases, parents must follow IRS guidelines. The IRS determines eligibility based on the child’s living arrangements, financial dependency, and other factors.
If both parents attempt to claim the same child, the IRS may reject one parent’s claim. The parent who meets IRS requirements will be allowed to keep the credit. The IRS may require documentation, including a certified copy of the court order, to resolve disputes.
Negotiating the Child Tax Credit in Custody Agreements
How Divorcing Parents Can Handle the Credit
Parents have several options when negotiating tax credits in divorce or custody agreements. The credit can:
- Be exclusively assigned to one parent.
- Alternate each year between parents.
- Be part of a broader financial agreement, such as one parent getting the credit while the other gets additional property or reduced expenses.
Parents must clearly outline these agreements in the final divorce decree to avoid conflicts later.
Mediation and Settlement Negotiations
Parents can settle tax-related issues through mediation or informal negotiations during a divorce or custody case. Attorneys can help draft clear language for agreements that prevent future disputes. A strong agreement avoids confusion and protects both parents’ rights.
What Happens When Parents Disagree?
IRS Rules in Case of Conflict
If parents cannot agree on who should claim the child tax credit, the IRS will decide based on tax laws. The IRS typically grants the credit to the parent with primary custody unless a court order states otherwise. The agency looks at:
- Who the child lived with the most in the tax year.
- Financial contributions each parent made toward the child’s care.
If both parents claim the same child, the IRS may delay both returns until the issue is resolved.
Court Limitations on Tax Credit Rulings
Family courts cannot decide federal tax matters. A divorce decree may include a tax credit agreement, but IRS rules take priority. If a parent tries to claim the credit despite an agreement, the IRS will decide based on federal regulations.
Parents who believe their co-parent wrongfully claimed the credit must address the issue directly with the IRS. The IRS may require additional documentation, including court orders and proof of the child’s residence.
What If Parents Share Custody?
Split Custody and Tax Credit Rules
In cases where both parents share equal custody, neither may meet the IRS requirement of having the child for more than half the year. This can create issues when determining who qualifies for the credit.
If a grandparent or another family member has court-ordered visitation, the time split between parents may not meet IRS thresholds. In such cases, parents should negotiate tax credit rights as part of their custody agreement.
Adding Tax Credit Language to a Divorce Decree
To avoid disputes, parents can include clear terms in their divorce or custody decree stating:
- Which parent gets to claim the credit each year.
- How the credit will alternate in shared custody arrangements.
- What steps to take if tax laws change.
A well-structured agreement prevents future legal battles over tax benefits.
Final Thoughts on Taxes and Divorce
Divorce and custody battles often involve complex financial decisions that shape a parent’s long-term stability. While most parents concentrate on child support, custody arrangements, and dividing assets, they often overlook important tax benefits—like the IRS Child Tax Credit—that can significantly impact their financial future. Understanding who can claim the credit and how custody agreements affect eligibility is crucial. Planning ahead by reviewing finances, creating a post-divorce budget, and accounting for tax implications can help parents avoid costly surprises. Factoring in benefits like the IRS Child Tax Credit ensures smarter financial choices and greater stability after divorce.
Seeking Professional Guidance
A family law attorney can help parents understand how tax credits fit into a custody or divorce agreement. However, for specific tax advice, consulting a certified public accountant (CPA) or tax professional is recommended. Mistakes on tax returns can lead to penalties, audits, or repayment demands from the IRS.
Need Help? Contact the Law Office of Bryan Fagan
If you need assistance with child tax credits, custody agreements, or divorce-related financial matters, the Law Office of Bryan Fagan offers free consultations six days a week. Our attorneys provide legal guidance in person, over the phone, and via video. Contact us today to discuss how we can help protect your rights and financial interests.
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