If you have children, you likely already know that claiming dependents on your taxes can qualify you for a tax credit. Congress recently expanded this tax credit, so parents with dependents can get more money back on their taxes.
According to MSN, the American Rescue Plan expanded the child tax credit temporarily to $3,000 for children under 17 and $3,600 for children five and younger. If you share custody with your spouse, you may wonder how this new expanded credit will apply to your situation.
How the expanded credit works
Under this new law, the expanded child tax credit is fully refundable. Even if you do not owe income taxes, you can still receive the total amount of the credit. You can also receive half of your credit this year in the form of monthly payments and claim the remaining amount of the credit when you file your taxes in 2022.
Just one parent can qualify
During the two prior rounds of stimulus checks, parents who shared child custody could each receive payments for the same child if they alternated claiming their child on their taxes every year. But with the expanded child tax credit, parents who share child custody cannot both receive this additional credit.
If you share custody of your children with your former spouse, you will need to decide how to divide this expanded credit. If you incorrectly claim your children, you may have to repay a portion of the credit or all of it when you file your taxes in 2022.