I Have Shared Custody of My Child: Should I Get Monthly Child Tax Credit Payments?

Parents in Colorado who have shared custody arrangements face a variety of challenges. One of those is working out which parent should get the monthly child tax credit. This is not always straightforward and the tax and income implications are significant.

Shared Custody and the Tax Credit

The tax credit for having a child goes to the parents on a monthly basis if they are married, but if they are not married, things get a little more complicated. American parents have always gotten access to a child tax credit, but for the 2021 tax year, new covid-related legislation changed the formula, the benefits cutoff levels, and the distribution of this credit. For that tax year, some parents got the credit as a monthly benefit, so they obtain it monthly during 2021 as an advance on the filings for that year.

The parent who will receive the benefit is whichever one claimed the child as a dependent on their filing in 2020. If neither did or the parents did not file tax returns for the 2020 tax year, then the IRS will use the 2019 tax year instead. This is all well and good as long as the parents do not plan to change which of them is filing for the tax credit next year. If they do plan to switch, then if they are a high-income household making more than $80,000, the parent getting the credit should consider opting out of it so that they don’t need to pay it back in the following year.

The child tax credit provides relief for many, but some parents may need to consider opting out to avoid a future tax hit.