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2021 Divorce Child Tax Credit

Prior to 2021 the Child Tax Credit was $2,000 per child for children 0 to 16 years old. Due to the passage of American Rescue Plan (ARPA) which is in effect for 2021 the amount and age classifications have changed as follows:

Children under 6, $3,600

Children 6 – 16, $3,000

Children 17, $3,000

Again, ARPA is so far only in effect for 2021. In addition to the changes made above the Child Tax Credit will be distributed in monthly checks starting in July 2021 for 50% of the anticipated benefit. Underpayments or overpayments will be trued up when you file your 2021 taxes.

Being aware of the ARPA changes is important because it may impact your current or in process Divorce Separation Agreement and Final Orders. For example, if your Separation Agreement has the parties taking the Child Tax Credit in alternating years it may end up that the wrong parent will start to receive the ARPA monthly payment based on the previous year tax filing. This can and will likely result in additional disputes if the credit is received and spent by the incorrect parent. Newly filed divorces should consider and have provisions addressing ARPA and language covering permanent adoption of ARPA or reversion to the old Child Tax Credit.

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