As part of the American Rescue Plan, families became eligible to receive Advance Child Tax Credit payments. In matters of child support, this can become confusing. Which parent receives the Advance Child Tax Credit? Does this tax credit count as income?
What is the Advance Child Tax Credit?
Beginning July 15, 2021, eligible families will begin to receive advance child tax credit payments. The total tax credit is equal to $3,600.00 for children under the age of 6 and $3,000.00 for children ages 6 – 17. The advance credit is determined by taking ½ of the eligible credit per child and proportioning that over 6 months. For example, if you have an 8-year-old child, you will be eligible to receive $1,500.00 in advance child tax credits, which over 6 months equals $250.00/month. The remaining $1,500.00 will be considered when you file your 2021 tax return.
Am I eligible to receive Advance Child Tax Credit Payments?
To qualify to receive the Advance Child Tax Credit payments, you must have an adjusted gross income of under $75,000.00 for a single filer or under $150,000.00 for a jointly filed tax return. The child or children must live with you for more than half the year. The child or children must also be under the age of 17 on December 31, 2021. Please take note that if you generally owe the IRS every year, you will have to pay back the child tax credit when you file your taxes, along with interest. To avoid this, navigate to the IRS website and opt out of the monthly child tax credit payment.
How does this effect support calculations?
The Advance Child Tax Credit payments are not considered income for support purposes. The Child Tax Credit is already considered as part of a parent’s tax filing status when calculating a support guideline. The only difference is now you can receive part of this tax credit monthly from July 2021 – December 2021, rather than having the full amount considered when you file your 2021 tax returns. However, please note that if you alternate who claims the child for tax purposes, you may want to file a modification petition.