Many families over the course of the last year received multiple rounds of stimulus payments from the federal government through the CARES Act in 2020 and the American Rescue Plan in 2021. These stimulus payments helped bridge the gap in funds many Americans experienced during the pandemic as a result of joblessness or needing to leave the workforce in order to care for children or sick loved ones. For some, these checks were a life raft that meant bills could be paid and groceries could be purchased. For others, it may have felt like a logistical nightmare. Many divorced and divorcing couples who were eligible to receive stimulus payments had to figure out how these “helpful” payments would impact the division of assets, child support and how to handle the expanded child tax credits.
Important: The impact of your stimulus payments on your divorce is dependent upon a number of factors. Be sure to consult with a skilled Family Law attorney who can look at the specifics of your case and help you determine how your stimulus payments may or may not affect your divorce. You should also seek input from an accountant who will take into consideration your complete tax situation along with your divorce and/or custody matters. Please note that we are not financial advisors, accountants or tax attorneys. Therefore, the content of this or any blog on our site is not intended as tax advice and should not be taken as such.
Stimulus Payments as Divisible Assets
One question we get a lot is whether or not stimulus payments are considered divisible assets among a divorcing couple. It’s hard to give a straight yes or no answer to this as each case is unique. However, one of the biggest factors impacting your stimulus payment is how you file your taxes. The IRS looks at your most recently filed tax return in order to determine your eligibility and amount of any stimulus payment you receive. If you filed jointly in your most recent return, the stimulus payments you receive may be considered marital property and will be divided equally between the two of you. However, if you filed separately in your most recent return, you will each receive separate stimulus payments and those will likely not be considered divisible assets in terms of the divorce.
Stimulus Payments and Child Support
If you have not yet received your latest round of stimulus payments from the American Rescue Plan and owe child support, you may be able to breathe a sigh of relief. Unlike with the first few rounds of stimulus payments, this latest round will not be garnished if you are behind on making child support payments to your ex.
Child Tax Credits and Divorced Parents
Child tax credits aren’t a new concept, but the American Rescue Plan included a provision that would substantially increase these credits for 2021. If you are recently divorced or just beginning the process, you may be wondering who gets to reap the benefits of the expanded child tax credits that will start going out on July 15th? That again, largely depends on the specifics of your case and family situation. In many cases, tax-related issues like the child tax credit are resolved during the divorce process and are written into the divorce agreement. Since only one parent can claim the children as dependents, the divorce agreement may stipulate who gets to claim the children on their taxes and when. Considerations like custody arrangements and adjusted gross income may factor in to these decisions. Please consult a skilled Family Law attorney for the best approach to handling this.
If your divorce is already finalized, these expanded child tax credits may cause issues that may not be addressed in your divorce agreement. In these situations, divorced parents can either resolve these issues themselves or consult legal counsel to help reach an amicable resolution.
Schedule a Consult with a Family Law Attorney Today!
Divorce can be a painful process- but it is not one that you have to go at alone! The skilled, knowledgeable and compassionate Family Law attorneys at Ferrante, Dill and Hisle, LLC stand by ready to answer every question and help you find a solution to your problem. We have stayed up-to-date on all of these COVID-related bills and how they may affect our clients. If you have any questions or concerns, please contact us today! Give us a call at (410) 535-6100 or send an email to email@example.com.