Child tax credit checks: 5 things parents who share custody need to know

The majority of American families will get a child tax credit payment on July 15 — the payments will continue going out on a monthly basis unless you decide to opt out of the partial monthly checks using the IRS portals. But what’s the situation for parents who have joint custody of a child? Will the IRS send both parents a check?

There are rules for parents who share custody of a child — including who’s eligible for a payment — how the expanded child tax credit is different than before. For example, as a parent, you could receive a total of up to $3,600 for each kid under age 18, and babies born during this year are eligible. Also, parents who pay little to no federal tax will get the full amount they qualify for, whereas in the past, lower-income families were excluded. 

There are also requirements your dependents must meet and limits on the money you get based on your adjusted gross income. As a parent, you should also know that you could get money back for child care expenses — up to $16,000. Plus, if you haven’t yet received your recent stimulus payment, you might want to know when to expect it, how to track it and what to know about the amended tax form. 

1. In shared-custody situations, can both parents get the monthly payment?

With the first two stimulus checks, parents who weren’t married but shared joint custody of a child could each receive a payment for the same child if they had been alternating years claiming the child on their taxes. With the most recent stimulus package, Congress closed off that loophole for the third stimulus checks. 

Can parents who share custody of a child take advantage of a similar loophole with the new temporary tax credit? No, said Elaine Maag, a principal research associate with the nonpartisan Tax Policy Center. Only one parent can claim the credit for a given child, Maag told us. And if you incorrectly claim a child this year, you may have to repay all or part of the payment next year.

Repaying any child tax credit overpayment is a departure from how the stimulus checks were handled. Typically, if you received an overpayment, you don’t need to send it back. (Here are situations where you’d need to return a stimulus check payment to the IRS.)

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2. Will the child tax credit money be used to pay child support?

According to the Congressional Research Service — Congress’ public policy research institute — the new law exempts the periodic child tax credit payments going out this year from offset for past-due child support. However, the amount you claim as a credit on your 2021 tax returns in 2022 could be subject to offset, CRS said, similar to how stimulus payments claimed as a Recovery Rebate Credit could be redirected to cover an overdue debt.

3. How exactly will the new child tax credit 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 taxes. The credit would reduce the amount of taxes they owed. That payment rule, however, excluded lower-income families who didn’t owe federal taxes and wouldn’t benefit from a tax saving with the credit. 

With the new law, the credit is “fully refundable,” so qualifying families will receive the full dollar amount even if they don’t owe income taxes. Families will receive half 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 instead, you’d rather get one check, the IRS will let you choose to receive the full payment next year when you file. Here are more details on how the child tax credit payments will work.

4. What are the eligibility rules for the new child tax credit?

The American Rescue Plan temporarily expands the child tax credit from $2,000 per child 16 years old and younger to $3,600 for children age 5 and younger and to $3,000 for children age 17 and younger. If you’ve got dependents between the ages of 18 and 24 who are enrolled in college full-time, you can receive $500 each for them, too. 

There are income limits and phase-out rules. If your adjusted gross income is $75,000 or less, single taxpayer parents will qualify for the full child tax credit amount, but that amount changes with incomes greater than $75,000.

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

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5. How much money can each family get in 2021 and 2022?

Over 90% of all families with children — from lowest to highest qualifying incomes — will receive an average benefit of $4,380, according to the Tax Policy Center. Half the amount will go out this year periodically, starting this summer in roughly equivalent payments, and the second half next year when you file your taxes. Calculate your payment total here.

For more information on other money you might be owed, here’s how to estimate your third stimulus check, how to track your payment and what we currently know about a possible fourth stimulus check.