The Child Tax Credit and Your Relief Check

Spring in Greensboro brings certain things. Pollen, unexpected rain showers, warmer weather, and taxes. The American Rescue Plan was enacted as part of ongoing Covid-19 relief. This plan provides an additional relief check, subject to income-cap requirements based on either 2019 or 2020 tax returns (most recent filed). The Plan also provides for an advance on half of a potential child tax credit for next year. These payments may both be at issue in a divorce case. Having tax return money in contention between divorcing spouses is hardly a novel concept. But due to the legislation providing pandemic relief, many spouses must find creative ways to divide relief funds when they were based on joint filings. The child credit advance presents a new wrinkle in divorce and custody cases.

The $1400 relief checks are available to individuals not making more than $75,000 in adjusted gross income, heads of households up to $112,500 Those that filed married filing jointly are capped at $150,000 and can receive $1,400 per person. Dependents, such as children, also net a $1400 per dependent. If you were married and filed taxes in those years that resulted in relief checks, those funds are very likely considered marital, with both spouses having a claim to them, and subject to equitable distribution.

The new American Rescue Plan also introduced advances for the 2021 child tax credit. Starting sometime in July, parents can automatically receive the credit to be disbursed in monthly installments if they file their 2020 tax returns by May 17. The amount of the total credit will depend on how many children, their age, and parent’s adjusted gross income: children 5 and under get up to $3,600 per child, and children 6-17 can get up to $3,000 per child. This credit is going to be based on 2020 tax returns, and if 2020 has yet to be filed, the 2019 tax return. That means that these advances for 2021 child tax credits will go to the spouse that claimed the children for either tax year 2019 or 2020. Then potentially, the 2021 credits may not go to the correct spouse, considering that most divorced parents have arrangements that allow claiming children on certain years (odd numbered vs. even). If you envision that you are in such a scenario, contact your attorney to discuss how to handle this special situation.