Child Tax Credit is a tax benefit provided by the Internal Revenue Service (IRS) to help families with the cost of raising children. For divorced parents, understanding how the Child Tax Credit works can be crucial in maximizing the benefits available to them. This article aims to provide an overview of how the Child Tax Credit works for divorced parents, along with answering some frequently asked questions.
The Child Tax Credit is available to parents who have a qualifying child under the age of 17. The credit is subtracted from the parent’s total tax liability, reducing the amount of taxes owed. If the credit exceeds the tax liability, the parent may be eligible for a refund of the remaining amount.
Here are eight frequently asked questions about the Child Tax Credit for divorced parents:
1. Can both parents claim the Child Tax Credit?
No, only one parent can claim the Child Tax Credit for a qualifying child. Generally, the custodial parent, i.e., the parent with whom the child lives for the majority of the year, is entitled to claim the credit. However, this can be negotiated and agreed upon between the parents.
2. Can the non-custodial parent claim the Child Tax Credit?
In certain situations, the non-custodial parent may be allowed to claim the Child Tax Credit. This can happen if the custodial parent agrees to release their claim to the credit by completing Form 8332, which allows the non-custodial parent to claim the credit for a specific tax year.
3. Can the Child Tax Credit be split between parents?
No, the Child Tax Credit cannot be split between parents. It can only be claimed by one parent, either the custodial or non-custodial parent, based on the agreement reached or court order.
4. Can the Child Tax Credit be transferred?
The Child Tax Credit cannot be transferred to another person or relative. It can only be claimed by the eligible parent.
5. What if the child spends equal time with both parents?
If the child spends an equal amount of time with both parents, the IRS considers the custodial parent as the one with whom the child spends the most nights during the year. The custodial parent is generally entitled to claim the Child Tax Credit.
6. Can the Child Tax Credit be claimed by a step-parent?
In most cases, a step-parent cannot claim the Child Tax Credit for a stepchild, as they are not considered the child’s legal parent. However, there are exceptions if the step-parent has legally adopted the child.
7. What happens if the parents cannot agree on who claims the Child Tax Credit?
If the parents cannot agree on who will claim the Child Tax Credit, the IRS default rule states that the custodial parent is entitled to claim the credit. The IRS does not get involved in resolving disputes between parents.
8. Can both parents claim the Additional Child Tax Credit?
No, only one parent can claim the Additional Child Tax Credit, which is a refundable credit available to those who qualify for the Child Tax Credit but have a tax liability that is less than the credit amount.
In conclusion, understanding how the Child Tax Credit works for divorced parents is crucial in ensuring that both parents maximize the benefits available to them. It is recommended for divorced parents to communicate and reach an agreement on who will claim the credit to avoid any potential conflicts. Consulting a tax professional or seeking legal advice can also be beneficial in navigating the complexities of the Child Tax Credit for divorced parents.