People going through divorces in North Carolina have to consider many different things when they are negotiating how their assets and property should be divided. Among others, they should consider their taxes and potentially negotiate the use of the enhanced child tax credits included in the American Rescue Plan.
Why enhanced tax credits should be considered
Congress passed the American Rescue Plan in the spring, which included increases to the child tax credit, child and dependent care tax credit, and the earned income tax credit. For people who are eligible for these credits, they can add up to thousands of dollars during this tax year. While only people earning incomes can claim the earned income tax credit and the child and dependent care tax credit, people can claim the child tax credit regardless of whether or not they are working. The child tax credit is worth as much as $3,600 for children younger than six and $3,000 for children between the ages of six and 17.
The Biden administration wants to make the enhanced tax credits permanent through the American Families Plan. However, it is unclear whether or not it will be passed by Congress. It is still a good idea for people who are going through a divorce to be proactive in negotiating just in case the credits are made permanent.
Not everyone is eligible for the enhanced tax credits. There is an income phase-out beginning at a salary of $112,500 for parents who file as heads of household and $75,000 for those who file as single filers. To qualify for the credits, a parent must pay for at least 50% of the child’s expenses, and the child must live with that parent more than 50% of the time. However, the other parent can grant the ability to claim the credit by filing Form 8832 with their income tax return.