Financial matters can be complicated during divorce, but they can also be pretty challenging to navigate when you have a child who is subject to a custody order. While you’ll have to figure out how medical, schooling, and extracurricular expenses will be divided, tax issues can be confusing, too.
Accepting a tax credit may not be in your best interests. This is because if you accept payments that you aren’t owed, then you’ll probably be on the hook for paying it back later.
So, when should you turn down a child tax credit? Here are some situations when you might want to turn down the advanced tax credit:
- It’s not your year to claim the credit: Only one parent can claim a child on each year’s taxes. Therefore, if it’s not your year, then you shouldn’t receive the credit. Accepting any payments may result in you having to pay it back. If you alternate who claims your child on taxes, then make sure that you’re clear on whose year it is.
- Your income is too high: The child tax credit phases out as income rises. The phase out starts at $150,000 for joint income households, and $75,000 for individual earners. Be wary of accepting the tax credit if your income increased significantly in 2021.
- Your child turns 18 this year: The child tax credit is only available for eligible children. If your child turns 18, then your child no longer qualifies. But you’ll keep receiving payments unless you opt out of them, which will put you in a position where you’ll have to pay that money back.
Know how to navigate your child tax issues
Child tax issues can be enormously complicated. But a misstep can leave you at a financial disadvantage. Therefore, you’ll want to do everything you can to protect your interests, which includes understanding the law and how it applies to your set of circumstances.