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Dear Cassie: Do I have the right to claim our children as a dependent on my
income taxes, even when I don’t have primary custody of them? -M.S.
Dear M.S.: You may already have a Settlement Agreement, Judgment of Divorce,
or Order which addresses the right of either party to claim the child or children as
a dependent, for purposes of the child tax credit (on your federal income tax returns)
and for purposes of the dependency exemption (on your state of New Jersey
income tax returns). In that event, that document would answer to your question.
As it relates to claiming a child for purposes of the child tax credit, there are
the most important of which are having a child age 17 and younger, and living
with the child for more than half of the year. In the context of a custody matter, the
parent of primary residence, or the parent with whom the child resides for more
than 50 percent of the time, is the parent who is eligible to receive this credit. Notwithstanding,
parties can negotiate alternating claiming this credit.
The child tax credit can be valuable. Initially, pursuant to the Tax Cuts and Jobs
Act of 2017, the tax credit that you received for having a child under the age of 17
equated to up to $2,000 per child. Pursuant to the American Rescue Act of 2021
(pertaining to the tax year 2021 only), the child tax credit can be as much as $3,000
per child for children ages 6 through 17, and $3,600 for children ages 5 and under.
Pursuant to the Tax Cuts and Jobs Act of 2017, the refundable portion of the child
tax credit was limited to $1,400 per child. Pursuant to the American Rescue Act of
2021 (pertaining to the tax year 2021 only), the credit is fully refundable for 2021.
The child tax credit is a credit applied to the actual tax you owe. In contrast, the
dependency exemption on your state income tax return equates to a reduction in
your taxable income. In this fashion, the child tax credit can be far more valuable.
By way of illustration, if your tax liability amounts to $4,000 and you apply a
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next edition of “Ask Cassie.”
Cassie Murphy is a divorce and family
and Woodbridge.
ASK CASSIE
child tax credit for $3,000 (for a child between the ages of 6 and 17), your
tax liability will reduce to $1,000 for 2021. Likewise, if you owe $0 in taxes
to the IRS and apply a child tax credit for $3,600 (for children ages 5 and
under), then you may be refunded up to $3,600 for 2021.
Importantly, there is a “phase out” to whom may claim the child tax
credit. Pursuant to the Tax Cuts and Jobs Act of 2017, single taxpayers with
-
ing jointly earning up to $400,000, were eligible to claim the credit of up
to $2,000 per eligible child. If you earn above those thresholds, you will
tax credit. Pursuant to the American Rescue Act of 2021, single taxpayers
jointly earning $150,000 or less are eligible to claim the additional credit
amount. Above these income thresholds, the extra amount above the original
$2,000 credit – either $1,000 or $1,600 per child – is reduced by $50 for
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