How do the Advance Child Tax Credits apply to divorced parents?

The American Rescue Plan includes a novel program that affords parents the chance to receive their enhanced child credit in advance of monthly payments.

For married parents, this program affords them much-needed financial support to help them provide for their children. However, when parents are divorced or in the process of separating, the matter is complicated. Do both parents share the payments, or do all of the payments go to one of them? If so, which parent gets them?

Your filing status – and your marital status – matter

The application of tax credits depends upon how you file your taxes. You only qualify for the full payment of the advance child tax credit payments if your combined income was less than $150,000 in 2020. If you earned more than $150,000, the credit will be will be phased out

Assuming you qualify for the full credit, you will receive $3,600 for each child under age six and $3,000 for children ages 6-17. This is an enhancement from last year’s credit where parents received $2,000 for each child up to age 16.

Parents will receive half of the credit in monthly installments this year. The second half will be claimed as a credit when filing your taxes next spring.

If you are still legally married to your spouse, the tax credit payments function like any other marital income. In other words, you won’t have to worry about who receives them until after the court hands down the final divorce decree.

How they apply to divorced parents

If you were already divorced when the payments started, however, the situation changes. In this case, you will have to examine your divorce decree carefully.

The Advance Child Tax Credit Payments are not free money – rather, they are advances on the normal child tax credit you would typically get when filing your taxes. Thus, they function just like regular child tax credits.

Your divorce decree should contain a provision determining which of you is entitled to claim your child on tax forms for purposes of the child tax credit. If you would normally receive the child tax credit, you are the one that should receive the Advance Payments. This is true whether you have sole or joint custody of your children.

Taxes are already a complex matter, and they become much more complicated when divorce is added to the equation. Fortunately, if you qualify, the IRS should send the advance payments directly to you without the need to file anything, even if you are divorced.