My husband and I are working with a mediator to finalize our divorce agreement. We are close but at our last meeting, my husband said he wanted to revise the part about child tax credits and exemptions. I am not sure why he is insisting on this last-minute change and the mediator could not get him to explain why, but he is insistent.  

At first, I was inclined to just give in and let him have the tax credits but now I am wondering why he is so insistent since our 4 kids spend most of their time with me — especially during the summer because I am a teacher and he doesn’t have summers off. I understand he might be entitled to them because he pays child support, but I want to be sure I’m not missing something here before I agree. Do you have any idea what his sudden issue could be? Is there a reason I should insist on keeping the children on my tax return?

I am not an accountant. You should run this issue by an accountant for more certainty.

Historically, before the tax law changed in 2018, divorcing parents figured out a way to share the dependency exemption, which often times put actual dollars back in people’s pockets by increasing their refunds. Usually the parties agreed to share the exemptions if there were an even number of children and if there were an odd number, they rotated so long as the parent who was obligated to pay child support was current on support. Now, most divorcing couples address child tax credits in agreements and the trend has been to share these credits along the same lines that dependency exemptions were historically shared.

Until now, the credit was $2,000 per child under the age 17. For 2021 only, the amount was increased to $3,000-$3,600 depending on the age of the children. Traditionally, the child tax credit has directly reduced a parent’s income tax liability. However, as part of the COVID-19 stimulus bill passed in March, beginning this month parents can enroll in advance child tax credit payments. If you do so, you will receive an advance payment of half the child tax credit. The other half of the credit will be credited against your income taxes due when your return is filed.

Because you did not say how old your children are, I cannot tell you the exact amount of the paycheck he is envisioning if you agree to his sudden proposal. If all four of your children are under age 6 and you agree to let him claim the tax credit, he is going to get a check for $7,200 from the government pretty quickly with another $7,200 credit against his taxes when he files his return next year. If they are older it will decrease some but still be a nice payout.

Bottom line, do not settle for less than half the credits.

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