Divorce and Tax Credits

If you are divorced or divorcing, you will need to reassess which tax credits you can claim on your tax return.

Do I Qualify for the Child Tax Credit?

The following information is current as of March 2014. The child tax credit begins to phase out at different income levels depending upon your marital filing status. If you are unmarried, the credit begins to phase-out at the income level of $75,000 per year. If you are married and filing a separate return, the credit begins to phase-out at the income level of $55,000 per year. If you are married and filing a joint return, the credit begins to phase-out at the income level of $110,000 per year. In order to qualify for the child tax credit, you must claim a “qualifying” child. There are six criteria that must be present in order for the child to qualify:

• Age: The child must have been under 17 at the end of the taxable year.
• Relationship: The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or one of their descendants. Under the tax code, adopted children are treated the same as biological children.
• Support: The child must have provided for less than ½ of his or her financial support during the taxable year.
• Citizenship: The child must be a U.S. citizen, national, or resident alien.
• Dependency: The child must be claimed as a dependent on your federal tax return.
• Residence: The child must have lived with you for more than one half of the taxable year.

If your child meets all six criteria and your income falls below the phase-out level for your filing status, you may claim the child tax credit for up to $1,000 per qualifying child. If you qualify for the child care credit, you may claim it on your tax return. To determine the amount of credit that you should take, please consult a tax specialist or the IRS website at www.irs.gov.

Do I Qualify for the Earned Income Credit?

The following information is current as of March 2014. In order to qualify for the earned income credit, your adjusted gross income (AGI) must be less than the maximum income level. Your AGI includes all income paid by your employer to you, income earned from self employment, long-term disability benefits received prior to retirement age, and tips. The maximum income level is adjusted annually and depends upon your filing status and number of qualifying children. The amount of tax credit you can claim can range from under $500 to over $5,000. In order to claim the credit, you must have earned income and you cannot be the qualifying child of another person.

A “qualifying child” is a person under the age of 19, still in school and under the age of 24, or permanently disabled that resides with the taxpayer for more than 1/2 of the year and is the taxpayer’s son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or one of their descendants. Under the tax code, adopted children are treated the same as biological children.

If you qualify for the earned income tax credit, you may claim it on your tax return. Even if the amount of the credit is greater than any taxes owed, you still must file a return. For this taxable year’s maximum income level and to determine the amount of your credit, please consult a tax specialist or the IRS website at www.irs.gov.

Do I Qualify for the Child Care Credit?

The following information is current as of March 2014. In order for expenses for child care to qualify for the child care credit, the care must have been provided for a qualifying person and the expenses must have been incurred so that you could work or look for work. Generally, to meet the requirements for a qualifying person under the tax code, the person must have lived with you for more than ½ of the taxable year.

If you are divorced or separated and your child does not meet the requirements for you to claim her as a dependent, you may still claim her as a qualifying child for the child care credit if you are the custodial parent and the child was in the custody of one or both parents during the taxable year; the child received over 1/2 of her support from one or both parents during the taxable year.

If you qualify for the child care credit, you may claim it on your tax return. Even if the amount of the credit is greater than any taxes owed, you still must file a return. The credit may be taken for up to 35% of the total cost of care, subject to credit maximums. To determine the amount of credit that you should take, please consult a tax specialist or the IRS website at www.irs.gov.

Please be advised that legal and/or tax issues can be very complex and are different for everyone, based on unique circumstances. The information provided here is informational only and should not be construed as personal legal or tax advice. Consult an attorney or tax specialist for advice on your situation.