American Rescue Plan Act 2021 – Child And Dependent Care Credit in Ohio Explained

On March 11, 2021, the American Rescue Plan Act (COVID-19 Stimulus Package) was signed into law. Most people are familiar with the stimulus checks, unemployment benefits, and other COVID-19 relief measures. 

However, another hidden gem within the signed legislation is an expansion of the child and dependent care credit. 

Whether you’re already divorced with children or contemplating divorce, you should have a clear understanding of how this tax credit affects custodial and noncustodial parents. 

At the Law Office of Dmitriy Borshchak, our family law lawyers take a holistic approach to divorce to ensure our clients are as prepared as possible. If you’re unsure how or if the American Rescue Plan Act of 2021 affects your divorce and child custody, we can help. 

Contact us at 614-334-6851 for your free consultation today. Learn more about the child and dependent care credit in Ohio below. 

What is the Child and Dependent Care Credit?

The child and dependent care credit is designed to help working parents or caregivers offset some of the costs of care. The expanded tax credit results in a direct reduction of your taxes for 2020 only. It’s still unclear if the expanded measures will be permanent. 

Moreover, the American Rescue Plan gives taxpayers an “advance payment” on up to half of their tax credit. Eligible parents and guardians can receive up to $300 a month from July – December. The tax credit is available to anyone with children, but it does decrease in the amount at certain income levels.

The American Rescue Plan Act Expansion of Child Tax Credits

The child and dependent care credit is nothing new. However, the COVID-19 Stimulus Package temporarily expands the tax credit in many ways, including:

● Increasing the amount of paid child or dependent care expenses eligible for a tax credit to $3,000 for children who are 17 or younger, and $3,600 for children under six

● Taxpayers can write off up to 50% of their child and dependent care expenses

● The expanded child and dependent care tax credit starts to phase out for high-income individuals

When Can a NonCustodial Parent Claim the Child And Dependent Care Credit?

Deciding who claims the children on their taxes can be challenging. That’s especially true if both parents are eligible to claim the child. In most cases, the custodial parent is the person who receives the tax benefit. 

In certain situations, a non-custodial parent can claim the child tax credit. However, they must meet specific qualifications. It’s important to note that child support is not tax-deductible. That means that paying child support is not a qualifying factor when determining eligibility for the child and dependent care tax credit.

Should We Wait to Divorce so We Can File Taxes Together? 

If you and your spouse are considering divorce or separation, it’s in your best interest to learn how that decision will affect your taxes. It can be an especially difficult topic if you and your spouse are interested in splitting the child and dependent care credit. 

Since the tax credit can only be claimed on one tax return, you can file jointly, or one parent can claim the credit. If you file your taxes jointly, a Columbus divorce attorney can help ensure that your divorce agreement addresses what happens to refunds and tax liabilities owed. 

My Spouse and I Can’t Agree on Who Gets The Tax Credit

If you and your spouse are filing taxes separately but still can’t decide who should claim the children as dependents, you should consult with an experienced divorce lawyer in Columbus, Ohio. 

Depending on the circumstances, you and your spouse may benefit from mediation. In other situations, you may need to rely on a judge to make a final determination. Contact us today to discuss your options. 

Contact the Best Lawyer For Divorce in Columbus Today

In addition to the child and dependent care credit, there are many other tax-related and financial issues to consider during a divorce. Before starting the divorce process, it’s recommended that you consult with a qualified tax professional and divorce attorney in Columbus. 

At the Law Office of Dmitriy Borshchak, our team of skilled divorce lawyers is here to help at every step of your divorce. Our attorneys are compassionate, proven, and prepared to advocate for your rights and the best possible outcome for you and your family. 

You don’t have to figure out the complexities of Ohio divorce law alone. We’re here to help. Contact us today at 614-334-6851 for your free consultation.