Biden's New Child Tax Credit
It’s no shock to anyone that the Biden administration’s new relief plan is going to be expensive, trillions of dollars. The new plan puts more money in the pockets of Americans, including the possibility of older dependents, and it addresses the millions of children in impoverished households. Navigating the extra money could be tricky for divorcing or divorced parents, but we explored some possibilities of how this could affect that demographic.
For a nation with the reputation of freedom and possibility, America does surprisingly little concerning child poverty, especially compared to most developed nations. The pandemic exposed the need to address child hunger and poverty, and the new relief package could forever change how the government aids families with the new child tax credit approach.
For single parents and those divorced households who saw a decrease in income or even a devastating job loss, this new amount of money could be a life saver.
The issue most divorced parents will need to discuss is: Who will claim the credit? With the option of monthly payments of the credit issued by the IRS or the option of claiming the year’s credit immediately, divorced parents will need to understand who receive the money and when.
Like the current child tax credit, the new one will likely depend on who custody of the child or children. Courts will likely go with what is already in place or what will be decided. If the money is dispersed monthly, it could go to one parent one month and the other the next, if the IRS can manage a complicated method of payment. The easiest method could be claiming the money for the entire year, but alternating yearly. Keep in mind, however, that this particular scenario references divorced parents who have custody split 50/50.
Parents who are the primary caregivers, who have sole custody, will receive the full amount. This goes for either the monthly payments or the yearly because this is how the tax credit works in its current state when filing for taxes.
Although there are downsides to the plan, the long-term effects of the pandemic for families, many struggling under normal circumstances, could greatly benefit divorced parents and children. This is a developing package by the current administration, so details from the IRS and the government will be forthcoming. Discuss the options with your former spouse and your attorney in order to understand your rights and what will best benefit your children or other dependents.
It’s about to get better. We’re here to help.