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Dependency Exemptions & The Child Tax Credit Under the TCJA

Making child custody and child support determinations is an integral aspect of the divorce process. Before spouses can legally part ways, they must first reach an agreement regarding related tax deductions and the child tax credit.

Before 2018, parents could claim qualifying children as dependents on their tax returns, excluding up to $4,050 per dependent. By working with attorneys and divorce mediators, former spouses could create an alternating schedule so they could each benefit from this exemption during different tax seasons. Or, if parents shared two children, they could each claim one child so they could both receive an annual exemption. Unfortunately, the new Tax Cuts and Jobs Act (TCJA) eliminates personal and dependent exemption deductions, which may be a concern for divorced couples who share custody of their children.

To offset this loss, the TCJA is doubling another tax benefit called the child tax credit. This tax credit is also negotiated during divorce proceedings and is a dollar-for-dollar reduction. Plus, $1,400 of this credit is potentially refundable. Previously, the child tax credit would allow you to reduce your taxes by $1,000 per qualifying child. Now that number has been increased to $2,000. Even a noncustodial parent can receive this benefit so long as the custodial parent agrees to sign Tax Form 8332.

Key changes to the child tax credit include:

  • Increasing the credit amount to $2,000
  • Changing the refund guidelines
  • Allowing partial credit

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With over 20 years of legal experience, our team knows the important of staying up-to-date on any changes in tax and divorce laws. Contact the New York City divorce lawyers at Peter L. Cedeño & Associates, P.C. if you have concerns about how the Tax Cuts and Jobs Act may affect your marital settlement agreement.

To schedule a consultation with our New York City divorce attorneys, call Peter L. Cedeño & Associates, P.C. at (212) 235-1382.

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