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Tax Credit Changes and Child Support: What You Need to Know

| Apr 23, 2024 | Taxes

Tax season is here, so if you’re a divorced parent, it’s time to brush up on tax credit changes for child support. From what’s new to who’s eligible for tax credit qualifications and more, consider this article your guide to tax credit and child support. Keep reading to maximize your deductions and file with confidence.

6 Key 2023 Tax Credit Changes Related to Child Support

Since 2019, several tax credit changes have shifted the way child support impacts filing. For divorced parents, changes to child support and tax credits can have a significant impact on our financial obligations and potential benefits. Here’s an overview of the critical changes that might impact your child support and tax credits.

4 Updated 2023 Child Support Calculations

1. Vision Insurance: Child support guidelines now cover comprehensive eye care benefits, so vision insurance is a factor in support calculations.

2. Higher Income Threshold: Most child support cases in North Carolina are subject to predetermined Guidelines. However, for families with a certain level of gross income, those rules do not apply. In 2023, off-guideline combined income increased from $30,000 to $40,000 monthly, or $480,000 annually.

3. No More “No Income” Claim: Parents who stay home with children under age 3 can no longer claim zero income, which helps ensure a fairer assessment of financial contributions.

4. Increased Minimum Income: The self-support reserve, which represents the minimum necessary income for basic needs, has climbed to $1,133 monthly to reflect the cost of living.

2 Tax Credit Changes for 2023

1. Deduction Replaces Refund: The Child Tax Credit has shifted to a $2,000 deduction directly applied to your adjusted gross income. This means the benefit is reflected in your tax bill rather than issued as a refund.

2. Enhanced Credit Amounts: Families with children under age 17 are now eligible for a higher credit, which ranges from $2,000 to $3,600, depending on the child’s age.

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2023 Tax Laws on Claiming Dependents after Divorce

Who gets to claim the child tax credit after a divorce? Typically, this credit goes to the custodial parent or whoever has primary custody of the child for more than 50% of the year. Under the IRS regulations, there is no such thing as dual custody. So, if your custody agreement entails a 50/50 arrangement, the parent with whom the child resides at least 183 nights during that tax year qualifies for the deduction or to the parent with the higher Adjusted Gross Income (AGI).

What Is Considered a Work-Related Childcare Expense for 2023 Tax Purposes?

Work-related tax laws for claiming dependents can provide significant tax benefits, including reduced taxable income. Here are some examples of expenses that qualify.

● Daycare: Costs associated with daycare centers, preschools, and after-school programs

● Nannies and Babysitters: Wages paid to nannies and babysitters who provide childcare services while you work

● Household Employees: Salaries paid to household employees who primarily care for your dependents while you work

● Transportation: Expenses incurred for transportation to and from childcare facilities, which include mileage and bus fares

● Summer Camps: Costs associated with summer camps that offer educational or recreational activities

Qualifying for 2023 Tax Credits Related to Dependent Care

Childcare expenses must meet the following criteria to qualify for a tax deduction.

1. Necessary for Work: The expenses must be incurred for the care of your dependent(s) while you work or actively look for work.

2. Qualified Dependent: The child(ren) must be under age 13 or physically or mentally incapable of self-care.

3. Dependent Care Provider: The care provider must be someone other than your spouse or a dependent that you claim on your tax return.

4. Documentation: You must keep detailed records of your childcare expenses, including

receipts, invoices, and payment confirmations.

Spidell Family Law Is Here to Help You Navigate Child Support Questions

Do you have additional questions about tax laws claiming dependents after divorce? The compassionate, experienced team at Spidell Family Law can help you handle all of the complexities of divorce, custody arrangements, and more.

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