When it comes to financial safeguards for children after divorce, most parents assume that child support is the only option. However, child tax benefits may also help divorcing spouses with the burden of single parenting. Although these child tax benefits can be complex, they may be worth pursuing. Before parents begin pursuing these benefits, they may wish to gain a more concrete understanding of how they work. Experienced family law attorneys in North Carolina and South Carolina may be able to help parents approach child tax benefits with greater confidence. Consultations could be insightful as parents plan out their lives before, during, and after divorce. To continue this conversation, consider dialing (888) 748-KING to reach King Law Offices.
What Is the Child Tax Credit in South Carolina?
South Carolina has many tax credits and benefits geared toward parents with minor children. The South Carolina Department of Revenue outlines these benefits, including the Earned Income Tax Credit (EITC) and the Two Wage Earned Credit. However, the most relevant benefit is the Child and Dependent Care Credit, which provides a maximum credit of $210 for one child or $420 for two or more children. In addition, South Carolina provides income tax deductions of $4,300 for each dependent child. Finally, each dependent child under the age of six provides an additional deduction of $4,300.
On the federal level, the Internal Revenue Service (IRS) offers the Child Tax Credit. This credit is available for parents with dependent children under the age of 17. This may apply to biological children, stepchildren, and foster children. If the child is employed, they are ineligible for this tax credit if they contribute to more than 50% of their support. In addition, the child must live with the parent who claims this credit for more than half of the tax year. Finally, the parent cannot claim this credit if their annual income is more than $200,000. The Treasury Department states that each dependent child under the age of six triggers a tax credit of up to $3,600. Each dependent child under the age of 18 triggers a credit of $3,000. The Treasury Department notes that the credit is fully refundable, which means that low-income families may receive the full credit amount. Another related benefit is the Child and Dependent Care Credit, which allows parents to receive credits for childcare costs while job searching.
Who Gets the Child Tax Benefits After Divorce?
Child tax benefits are clearly worth pursuing, and they can provide various families with much-needed support. These benefits may be particularly critical for divorced parents, as the end of marriage often brings serious financial pressures. Divorcing parents may wonder whether they will continue to receive these benefits, especially if they plan to share custody equally. From a logical perspective, it makes sense for the primary custodial guardian to claim the child as their dependent for tax purposes. Since the child lives with this parent for the majority of the time, it is safe to say that this parent incurs most of the childcare costs and thus benefits more from the tax credits.
Only One Parent Can Claim the Child as a Dependent
When it comes to claiming child tax benefits after divorce, the IRS is very clear: Only one parent can claim the child as a dependent. There is no way to divide these benefits between two parents each year. If each parent tries to claim the child as a dependent, the IRS warns that this will cause delays. In this situation, the IRS will attempt to determine which parent should receive these benefits based on various rules. Perhaps the most relevant rule is the residency rule, which states that parents can only claim these credits if their dependent child leaves with them for more than half of the tax year. This inherently makes the primary custodial guardian more likely to receive the EITC.
Who Gets the Child Tax Benefits if Parents Share Equal Custody?
Many parents pursue shared physical custody. In some cases, they divide parenting time in a 50/50 manner. As a year has 365 days, it is impossible to divide parenting time precisely in half. However, the IRS still provides guidance for this situation. If parents spend an equal number of nights with their child over the course of a year, the IRS states that the parent with the higher adjusted gross income will receive the child tax benefits.
Spouses May Agree on How to Divide Child Tax Benefits
During alternative dispute resolution (ADR), spouses may agree on how to divide child tax benefits. For example, parents may choose to mediate their uncontested divorce instead of pursuing a trial. During the subsequent negotiations, the parents might agree to “take turns” claiming their only child as a dependent. However, this pattern must be consistent with changes in physical custody. If a parent agrees to forfeit these child tax benefits every other year, they must also spend less than 50% of their time with the child every other year.
This challenge may be easier for parents who have an equal number of children. For example, divorced parents with two children may agree to each claim one as a dependent. This type of marital settlement agreement is simpler because it does not require parents to alternate. For more information on flexible agreements during uncontested divorces, consider speaking with King Law Offices.
Can King Law Offices Help Me Learn More About Child Tax Benefits?
Online research may be helpful for parents who want to learn more about child tax benefits. However, it might be difficult to engage in effective tax planning unless parents take into account their own unique circumstances. While an article cannot deliver personalized guidance, an experienced family law attorney in South Carolina may be able to. While considering certain tax implications for each divorce, these legal professionals may assess various factors. These might include custody, income, and the best interests of the children. To discuss these factors in greater detail, consider contacting King Law Offices at (888) 748-KING.