The American Rescue Plan significantly boosted the 2021 Child Tax Credit, helping 65 million children and families across the U.S. It brings significant relief for households nationwide. However, its newly implemented advanced payment system has raised questions for divorced or separated parents that’ll we aim to answer below.
The Child Tax Credit originated from the Taxpayer Relief Act of 1997 and was introduced to provide financial relief to families, so they could care for their children. The original credit was non-refundable credit was $400 per child under 17-years-old.
In 2001, it changed to a fully refundable tax credit, meaning it generates a tax refund even if a person does not owe taxes, or it reduces the amount of tax owed. Twenty years later, as of 2021, the American Rescue Plan Act was passed with additional benefits to relieve the pressure from the Covid-19 economic crisis.
The American Rescue Plan Act of 2021 (ARPA) made 4 key changes to the 2021 Child Tax Credit:
Families must meet the following criteria to qualify for the Child Tax Credit:
While nearly all families with children qualify, there are some limitations for those who have a higher income. They may receive a smaller credit or none, depending on their financial situation. Families earning less than $150,000 and single parents making less than $112,500 qualify for the additional 2021 Tax Credit amounts.
The IRS stipulates only one parent can claim per child per year. The parties may agree on which parent should receive the tax credit. One parent may be awarded the credit or the parties can choose to alternate the credit. Discuss all factors with a qualified Georgia family lawyer to determine what options are best in your case.
Currently, at the time of writing, there is no guidance from the IRS or Treasury Department on how the Advance Tax Credit will be distributed for divorced or separated parents, especially for those who alternate Child Tax Credit claims on a yearly basis.
It is likely the parent who claimed a child in 2020 will be the one to receive the advanced payment in 2021. This may result in one parent receiving credit two years in a row. Should this be an issue, it may be advisable to opt out of advanced payments so parents can wait to claim credit when they file taxes next year.
The 2021 Child Tax Credit is highly beneficial for most families, including if the parents are divorced or separated. If you are unsure how to file for the 2021 Child Tax Credit, you may want to seek legal guidance from a lawyer to avoid submitting applications with errors and delaying the Advance Tax Credit payments.
If you have questions about the 2021 Child Tax Credit it is wise to consult with a Family Law attorney on any concerns, significant issues or changes to your circumstances.
Attorney Sharon Jackson has years of legal experience in Gwinnett County and surrounding areas, sensitivity to family dynamics and has helped numerous Georgia parents secure favorable outcomes for themselves and their children in difficult family law cases.
Call Attorney Sharon Jackson today at (678) 436-3636 or use our online contact form to schedule an appointment.
Attorney Sharon Jackson LLC
175 Langley Drive, Suite A1
Lawrenceville, GA 30046
Phone: (678) 909-4100
Fax: (678) 281-0482