How A Taxpayer’s Custody Situation May Affect Their Advance Child Tax Credit Payments

When Custody Changes, So Do The Payments

Advance Child Tax Credit payments were based on the most recent tax return the IRS had on file. But custody situations change, and many families discover that whoever receives the monthly payments might not actually be the person allowed to claim the child that year.

That leads to confusion, unexpected repayment, and sometimes delayed refunds.

Who is actually eligible depends on who claims the child

The IRS uses something simple:
the parent who claims the child on their tax return for that year is the one eligible for the Child Tax Credit.

However, Advance payments were often sent automatically based on the prior year’s return, meaning:

• the wrong parent may have received the payments
• the right parent might receive nothing
• someone may have to repay

What if parents alternate years?

Many families follow a written agreement that alternates the tax benefits every other year.

Example arrangement:

• Mom claims in 2024
• Dad claims in 2025

If that agreement continues, only the parent who is claiming the child for the current tax year should receive the credit.

But if last year’s return was filed by the other parent, advance CTC payments may go to the wrong person.

Can payments be transferred between parents?

No.
The IRS does not transfer payments based on family agreements.

However, the parent who received Advance payments may have to repay them on their next return if they were not eligible based on custody for the year.

What if your child stayed with you more this year?

The IRS bases who gets the full credit on who the child lived with the majority of the year.

Key rule to remember:
The parent who provided more than half of the child’s home during the year generally has the right to claim the credit.

Evidence can include:

• school records
• daycare records
• medical records
• housing documents

What happens if the wrong parent receives Advance payments?

The IRS may require repayment when tax returns are filed, especially if the other parent claims the child that year.

However, some taxpayers may qualify for repayment protection based on income thresholds.

Tip: The IRS Portal lets parents update information

When Advance CTC was active, adjustments could be made using the IRS Update Portal, including:

• custody changes
• dependency changes
• banking information
• income changes

Future programs may also rely on the same functionality.

Watch out for repayment at tax time

If a parent received money but was not the eligible taxpayer, the IRS may add those Advance payments back to their balance due.

This surprises parents every filing season.

Custody matters more than most people realize. The Child Tax Credit always ties back to one thing:

• Who is eligible to claim the child on the current tax return

Not who received payments earlier in the year.

When custody shifts, taxpayers need to be prepared for changes in Advance payments, possible repayment, or amended claims.