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A Primer on the Child Tax Credit

Regardless of what time of year couples get divorced, it is important to consider the tax consequences of child custody and visitation arrangement options. Failing to do so could potentially result in parents losing hundreds or thousands of dollars in tax credits and refunds.

What Sorts of Tax Credits Can Be Affected?

There are two main types of child-related tax credits that are directly affected by the structure of child custody arrangements:

  • The Child Tax Credit
  • The Additional Child Tax Credit

While these two programs are somewhat similar, in that they both rely upon the same eligibility criteria, they are different in the fact that one is simply a credit (which deducts money from the taxpayer's overall gross income, thus reducing the tax base) and one is a potentially refundable amount.

Qualifying for the Child Tax Credit

The Internal Revenue Service (IRS) has set forth a list of eligibility criteria that it uses to determine whether a taxpayer is entitled to use the $1,000 per qualifying child Child Tax Credit or Additional Child Tax Credit. These criteria include:

  • Age - child must age 16 or younger at the end of the tax calendar year
  • Relationship - the child must be a blood, step-, foster or adopted relative (a son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, grandchild, niece or nephew) of the taxpayer
  • Support - the child must rely upon the taxpayer for at least half of his or her support
  • Dependant - the child must qualify to be treated as a dependant for tax reporting purposes according to the criteria set forth by the IRS
  • Citizenship - the child must be a U.S. citizen, national or resident alien (have a green card)
  • Residence - the child must live with the taxpayer for more than half of the tax calendar year

There are financial limitations to qualification for the credit, and the amount credited begins being phased out for a single taxpayer making more than $75,000 per tax calendar year. Married taxpayers filing a joint return cannot make more than $110,000 and still get the whole credit amount.

If a taxpayer meets all the above criteria, and meets a few other requirements, he or she might qualify for the Additional Child Tax Credit, which - unlike the regular Child Tax Credit - could potentially produce a refundable amount for the taxpayer. Tax considerations are just some of the many reasons why it is important to work with a skilled family law attorney when involved in a child custody dispute.

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