Children as Dependents under the New Tax Law

As the parent of a child (or multiple children), a divorce can be a more complicated process for you than most. After all, along with the typical concerns that separating parties face around equitable distribution, spousal maintenance, and more, you’ll also need to think about who is going to get custody over the child, and how parenting time should be awarded. Since looking after a child, and ensuring that your youngster has the same quality of life that they had when you were married can be an expensive process, concerns surrounding child tax credits and child support are often top of mind for divorcing parents. After all, in the right circumstances, the tax credits you can be eligible for when caring for a child can help substantially with easing the transition into your new life. Now that the tax laws are changing, it’s important to be aware of what this transformation means to divorcing parties in the years ahead.

Mr. Shapiro is not a tax lawyer, and he recommends that his clients discuss their issues with tax professionals and CPAs if they need specific guidance with managing tax. However, if you’re simply looking for an overview about the tax reforms established this year, then a divorce lawyer and child custody attorney like Mr. Shapiro may be able to help. The new tax laws passed in December 2017 mean that divorcing parties will have more financial issues to think about when coming to terms about the end of their marriage. Up until now, divorce lawyers have worked with the custodial parent to ensure that they can claim their children as a dependent. Often, Darren Shapiro finds that if more flexibility is necessary, the parties can make agreements where the non-custodial party can claim for “some” of the time spent with children, or one of the children if there’s more than one dependent in the family.

After 2018, however, maintenance payments will not be deductible for tax purposes. This means that the party in a divorce responsible for paying child support may be more inclined to fight for the right to claim tax benefits. Importantly, the nature of child support payments will not change, as this money was already non-deductible in tax returns.

The Changing Nature of Child Support and Tax

As a professional that does divorce mediation and a divorce attorney, Mr. Darren Shapiro knows better than most how complex it can be for parties to come to an agreement about how a tax return should be filed – particularly in scenarios where custody is shared between both parents. Often, he works alongside his clients to search for solutions that might be suitable for both parents. For instance, if the paying party is up-to-date with their child support payments, then the parties involved in the divorce may choose to alternate years when claiming dependents if there’s only a single child involved. Alternatively, if there’s more than one dependent to claim for, each parent might choose to claim for a different child. Of course, depending on the circumstances, each client’s scenario can differ. Sometimes the non-custodial parent will always claim the children as dependents, while in other situations, the custodial parent will always claim the deduction.

Mr. Shapiro and many other divorce attorneys like him believe that the changing tax laws may have a significant impact on the way that parents approach the concerns of child tax returns and child tax credit. According to some reports , the amount of credit a parent will have access to in 2018 is doubling, which means that parents can access more support following their divorce for help looking after a child. What’s more, a greater amount of credit will be “refundable” according to the updated laws. While a credit that’s non-refundable can help to bring a taxpayer’s bill down to zero, a refundable credit can be awarded even after a party has no tax left to pay. This means that if you can claim $1500 but you only need to pay $1000, you’ll be refunded the additional $500.

While it’s difficult to predict how any party will respond to the changing nature of the tax laws and child tax credits, the fact that paying spouses can no longer claim deductions for their maintenance and support credits could mean that negotiations become more complex for certain couples. The good news is that with the right support from a divorce lawyer like Mr. Shapiro, it’s still possible for clients to find an agreement that suits both parties.

The nature of child support, tax credits, and divorce-related finance has always meant that divorce is a difficult transition to come to terms with for many couples. However, now that the tax laws are changing, it’s more important than ever to make sure that you have the support of a well-informed divorce practitioner to help you decide which path you should take in the best interests of yourself, and your children. Mr. Shapiro not only offers litigation services, but also modes of alternative dispute resolution that can make it easier for some clients to find an agreement that works for everyone involved.

To learn more about dealing with taxes after divorce, or understanding the complexity of child custody and maintenance, browse through some of our other blog posts, or contact Mr. Shapiro today either over the phone at (516) 333-6555, or via our online contact form. Don’t forget to schedule your free, half-hour consultation.