Among the many issues that divorcing couples with children must face is one often worth thousands of dollars: who will claim the kids on their tax returns? As tax season begins on Jan. 23, let’s look at some of the child-related tax benefits that should be considered during a divorce.
Child Tax Credit
According to the IRS, the Child Tax Credit helps families with qualifying children get a tax break. For the 2022 tax year, individual filers who earned less than $200,000 can receive a $2,000 credit toward their outstanding federal tax liability per qualifying child age 16 or younger. For individuals who earned more than $200,000, the Child Tax Credit amount is reduced by $50 for each additional $1,000 of income until it is eliminated. Those whose Child Tax Credit amount exceeds their 2022 tax liability may be eligible for a tax refund of up to $1,500.
In order to qualify for the Child Tax Credit, a parent must have a qualifying child live with them for at least half of the year and must cover at least 50% of that child’s expenses. A parent can allow the other parent to claim the Child Tax Credit for a particular child, however, by executing IRS Form 8332.
Earned Income Tax Credit
The Earned Income Tax Credit is a fully refundable tax credit for those with
low-to-moderate earned income. Similar to the Child Tax Credit, the Earned Income Tax Credit is a credit, not a deduction, which means that it directly reduces the amount that you owe to the federal government. The amount of Earned Income Tax Credit a parent is eligible for depends on income, filing status and the number of qualifying children you have. No Earned Income Tax Credit is available for a single filer earning more than $53,057 per year. Unlike the Child Tax Credit, the Earned Income Tax Credit can only be claimed by the parent who the qualifying child lived with for more than half of the year.
Child, Dependent Care Tax Credit
For working parents with children who are disabled or under the age of 13, the Child and Dependent Care Tax Credit is available to offset the cost of providing care for these children. The amount of the credit is a percentage of the amount of work-related expenses paid to a care provider based on the parent’s adjusted gross income. The total expenses that a parent can use to calculate the credit may not exceed $3,000 for one qualifying child or $6,000 for two or more qualifying children. Similar to the Earned Income Tax Credit , the Child and Dependent Care Tax Credit can only be claimed by the parent who the qualifying child lived with for more than half of the year.
Head of Household Status
An unmarried parent who paid the majority of their home upkeep costs in 2022 and who had a qualifying child live with them for more than half of the year may be able to file under head of household status. There are two main advantages to filing as head of household: a higher standard deduction, $19,400 versus the $12,950 available to single filers, and the potential to be taxed at a lower tax rate. A parent may still be eligible to file as head of household even if the other parent can claim the qualifying child for purposes of the Child Tax Credit.
These are just a few of the child-related tax issues that parents should consider when divorcing. I encourage you to consult with your accountant or a tax professional to see which of these, and other, child-related tax benefits you may be able to utilize.
Andrew Zashin is a co-managing partner with Zashin & Rich, with offices in Cleveland and Columbus. He writes about law for the Cleveland Jewish News.