One of the major financial headlines of the last few weeks has been the stalled Build Back Better bill. Intended to provide climate change funding, childcare breaks, and more, it will be interesting to see if any version of the bill is ultimately passed.
A large component of the bill was the child care tax credit, which had been extended and paid out throughout the last year. The bill currently contains a provision to continue with the expanded child tax credit, which has assisted with child poverty. It is assumed that some portion of the current expanded child tax credit will remain in the final bill, if passed, though it might not be as large a sum, available to as many families, or expanded for ten years as currently constructed.
The child tax credit is also something to consider in a divorce.
Child Tax Credit and Divorce
If you are going through a divorce, you want to make sure that you are receiving at least one half of the child tax credit. This sum is $500.00 per month per children over six, and $600.00 per month for children under six, although the actual sum you’ll receive is contingent upon your household income.
If your spouse’s bank account has been used for direct deposit, and your divorce is not finalized, then the government may be paying this money out directly to your ex. Or whoever is receiving the mail might be in control of the tax credit, which can add up to a decently large sum of money over time.
(But note that as of now there are no tax credits planned to go out in January, and even if the bill is ultimately passed, it will probably lead to a double payment in February ’22.)
If you are already divorced, then your Agreement might indicate how child tax credits will be handled. They are generally split between the parents. For instance, if there is one child then the first parent might claim that child in even years and the second in odd years. This has been somewhat complicated by the changes to the child tax credit for 2021, and the uncertainty about such credits in 2022.
If you have children, your divorce agreement should affirmatively address what will be done with the child tax credits. In certain circumstances, such as if a parent does not have custody, or if a spouse does not have sufficient income to benefit from a credit, then additional care may be required to address these issues.
With the uncertainty surrounding the Build Back Better bill, be certain to pay attention to how the law progresses and how federal child tax credits are treated in upcoming tax years.
If you have any questions about how child tax credits might impact your divorce, then be sure to discuss this issue with a competent lawyer in your jurisdiction.