Understanding the Child Tax Credit After Separation or Divorce

There are numerous everyday factors to think about when you separate, especially when you and your spouse have children. From deciding on custody, visitation, and support to splitting activities like extracurriculars, doctors’ appointments, and school projects, co-parenting is a lot of work. In addition to these routine factors, there are also occasional or special considerations when you have children and are separated from your spouse.

Separated spouses with children must resolve a variety of tax issues during their period of separation and after they’ve divorced. One common question that many divorcing parents have around tax season is about the child tax credit.

What is the Child Tax Credit?

The child tax credit (CTC) is a federal tax benefit offered to people with minor children. It can provide a financial boost for many families, and this is especially true when parents are going through a divorce, which can be an expensive process. The CTC reduces a parent’s tax obligation and can even lead to a partial refund in some cases.

The CTC isn’t available to every taxpayer, but if you and your spouse meet the criteria, there may be disagreement about who will get the credit. The eligibility requirements include the child’s age, their relationship to the taxpayer, and the modified adjusted gross income of the taxpayer.

The child tax credit for taxes filed this year, which would be for the income earned in 2023, is $2,000 for each child that qualifies. Of that amount, $1,600 may be refundable. These totals apply to people whose modified adjusted gross income in 2023 was below a certain threshold. If you and your spouse plan to file as married filing jointly, then you cannot have made over $400,000 in combined income. If you are not filing jointly with your spouse this year, your income must be $200,000 or below to qualify for the full CTC.

Do You and Your Spouse Qualify for the CTC?

In addition to the income requirements, there are quite a few rules regarding which parents or guardians qualify for the CTC. Whichever parent claims the child tax credit on their taxes will need to meet the below criteria:

• The child must be under 17 years old as of December 31, 2023.
• The child must meet one of the approved relationship types. You can claim minors other than your son or daughter, including stepchildren, foster children, brothers, sisters, nieces, nephews, and grandchildren.
• The child must be your dependent.
• The child must have lived with you for a set period of time throughout the year, usually at least six months.
• You must have financially supported the child during the year in question.
• The child must have a valid social security number and be classified as a U.S. citizen, national, or resident alien.

Which Parent Can Claim the Child for Tax Credit?

As a general rule, only one parent can claim the child and receive the child tax credit. The requirements of the CTC mean that the custodial parent must claim the credit. However, separated parents who were living apart for the last half of 2023 can agree for the noncustodial parent to receive the CTC. The key word is agree, though. In those cases, the custodial parent can provide a written declaration allowing the noncustodial parent to claim the tax credit.

What happens if you and your spouse cannot agree on this topic, and you can both claim your child? The Internal Revenue Service (IRS) has tiebreaker rules for this scenario. If you are not filing jointly in 2024 but you both could claim the child, the IRS uses the following criteria to determine which parent can receive the CTC:

• The IRS first uses the residency requirement and will consider the minor as a qualifying child of whichever parent they lived with for a longer period during 2023.
• If the child splits their time equally between both parents, then the next deciding factor is adjusted gross income. The parent with the higher adjusted gross income in 2023 will receive the child tax credit.

Can You Negotiate a Different Tax Arrangement with Your Spouse?

There are some situations that allow parents to agree to their own terms or negotiate an alternate arrangement for tax issues. If you and your spouse want to decide on a different arrangement, such as alternating years for claiming your child, that may be an option as you finalize your divorce.

It’s important during this process to have trusted legal representation, especially if you expect there to be disagreements about how the CTC and other matters should be handled. The child tax credit will be looked at as part of a larger whole, which will include factors like custody and support. There are complex tax laws and California state laws to consider in these situations, which is why most parents choose to work with an experienced divorce attorney.

Contact Sarieh Family Law to schedule a free case evaluation. Our Santa Ana family law attorneys are happy to discuss your case and help you decide on the next steps you need to take during your period of separation.