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Child discount 2021: 5 important things for parents who share custody



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The new rules regarding the child discount determine who will and who will not receive the money.

Sarah Tew / CNET

If you share custody of a child, you are probably wondering if you and the other parent both have the payment of the child discount. The enhanced payments begin on July 15th and are sent monthly through December – the rest of the money will reach you tax returns next year. When it two IRS portals have been opened, you have the option to unsubscribe from monthly checks.

The benefits of your child discount may be as big as $ 3,600 if you have children under the age of 18. But your children must meet certain requirements (babies born in 2021 are eligible), and your adjusted gross income matters too. More importantly, parents who pay little to no federal tax receive the full amount for which they are eligible (in the past, lower income families were excluded).

So how is the improved child credit different now, who is qualify for a payment and do parents who jointly share custody of a child get any money? We will explain. Plus, here’s more on the current stimulus check timeline, how follow that payment and what you need to know about the amended tax form. You could also get it up to $ 16,000 back for childcare costs.

Only one parent in shared custody can receive the advance

With the first two stimulus controls, parents who were not married but shared joint custody of a child can each receive compensation for the same child if they had been alternating years to claim the child on their taxes. With the new bill, Congress closed that loophole for third stimulus checks.

Can parents who share custody of a child benefit from a similar loophole with the new temporary tax credit? No, said Elaine Maag, a leading research associate at the impartial Tax Policy Center. Only one person can claim the credit for a particular child, Maag said. And if you incorrectly declare a child this year, you may have to repay all or part of the benefit next year.

Refunding any overpaid child discount differs from the way in which the incentive checks are handled. If you have received an overpayment, you usually do not need to return it. (Here are situations when you should return a stimulus check payment to the IRS.)






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If you owe child support in arrears, will your child discount be seized to cover it?

According to the Congressional Research Service – Congress’s public policy research institute – the new law exempts the periodic child discount allowances that are going out this year from netting for child support arrears. However, the amount you claim as a credit on your 2021 tax returns in 2022 can be offset, CRS said, similar to how incentive payments claimed as a Credit for chargeback discount could be diverted to cover an overdue debt.

How does the increased child discount work?

Before the changes this year with the American Rescue Plan, eligible families could claim a tax credit for their qualified children when they filed their tax returns. The credit would reduce the amount of taxes they owed. However, that payment rule excluded lower-income families who did not owe federal taxes and would not benefit from a tax savings with the credit.

With the new law, the credit is “fully refundable,” so eligible families will receive the full dollar amount, even if they don’t owe any income tax. Families will receive half of the credit this year through period payments starting in July and the second half of the credit in 2022 when they file their 2021 taxes during next year’s tax season. If you’d rather get one check instead, the IRS will let you choose to receive full payment next year when you sign up. There are more details on this how the child discount will work.

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More than 9 in 10 families with children are eligible for the extended child discount.

Sarah Tew / CNET

Are you eligible for the early child discount?

The American Rescue Plan temporarily extends the child tax credit from $ 2,000 per child 16 and under to $ 3,600 for children 5 and under and up to $ 3,000 for children 17 and under. If you have dependents between the ages of 18 and 24 who are enrolled full-time in college, you can receive $ 500 each for them too.

The temporary expansion also makes the credit available to families in all US territories. Previously, the repayable credit was available to families in the US states, Guam, Virgin Islands, Northern Mariana Islands, and Puerto Rico.






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The amount that your family could receive between this year and next year

According to the Tax Policy Center, more than 90% of all families with children – from the lowest to the highest eligible income – receive an average benefit of $ 4,380. Half of the amount will go out periodically this year, starting this summer with roughly equivalent payments, and the second half next year when you file your tax return. Calculate your payment total here.

To learn more about other funding, here’s how estimate your third stimulus check, how track your payment and what we know about a possible fourth stimulus check so far.


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