Minnesota parents who are divorced might wonder how the federal child tax credit is affected by their custody and child support arrangements. It is important to note that the child tax credit can only be claimed by people whose income is under a certain limit. In 2015, that limit was $75,000 for people who were not married.
A qualifying child must be under the age of 17, must be claimed as a dependent and must be a U.S. citizen. Only one parent may claim this credit, and usually, it is the person who has primary physical custody and is using the dependency tax exemption. However, that parent may fill out Form 8332 that allows the other parent, usually the one paying child support, to claim the credit instead. That parent would then also be able to take the dependency tax exemption.
If a parent owes income tax, the amount that can be claimed might be limited. However, there are exceptions to this rule. If the parent owes less tax than the amount of child tax credit that is due to them, they might be able to claim a portion of the difference. Parents should find out whether they are eligible for the Additional Child Tax Credit, the Earned Income Tax Credit and the Child and Dependent Care Credit.
Divorce can have many tax implications such as these that people may not think about when they are struggling with issues around child custody, support and property division. Just as tax exemptions may be affected by custody arrangements, people might also want to look into how various ways of splitting a retirement account or taking over a mortgage might have an impact on their taxes. An attorney can often assist a person in making sound financial decisions during a divorce.