Child Tax Credit Under Married Filing Separately & W-4 Form Adjustment

[john307sf]

Hi everyone,

We are expecting a newborn in 2025 and plan to file our taxes under Married Filing Separately. To maximize the $2,000 Child Tax Credit, both my spouse and I submitted W-4 forms with $1,000 entered in Step 3 ("Add the amounts above for qualifying children and other dependents...") to reduce withholding from our employers.

However, I recently came across an article stating that Married Filing Separately may not allow an equal split of the $2,000 Child Tax Credit between spouses. Now, I’m unsure if our current approach is correct.

I have a few questions:

1. Can we each claim $1,000 of the Child Tax Credit under Married Filing Separately, or is that not allowed?
2. If splitting is not allowed, how should we correct our W-4 forms to avoid potential tax issues?
3. If it is allowed but we need to take additional steps, what should we do?

I’d appreciate any guidance on how to properly handle this situation. Thanks in advance!

[NCperson]

can I ask why you are planning to file SEPARATE.

Unless related to minimizing student loans payments, it is highly unlikely to be financially beneficial and more likely to cause to you to pay more in tax. 

[MonikaK1]

Here are the answers to your three questions:

• Can we each claim $1,000 of the Child Tax Credit under Married Filing Separately, or is that not allowed?

No, you cannot split the Child Tax Credit between spouses filing separately.

If you and your spouse live together, and you are both the parents of the children who live with you, then you both qualify to claim them. If you have two children, you can decide between you to each claim one child on your separate tax returns. List only the child you are claiming on your tax return. If a child's SSN appears on more than one return, the second return will be rejected.

See this IRS webpage for more information on who qualifies for the Child Tax Credit.

By claiming the credit on a Separate return, you can only receive half the amount of the credit (up to $1,000) you would receive on a joint return. For 2024, the credit is up to $2,000 per qualifying child. To qualify, a child must have a Social Security number and be under age 17 at the end of 2024.

• If splitting is not allowed, how should we correct our W-4 forms to avoid potential tax issues?

You can do it on paper or electronically. You can ask your employer for a new form or you can have TurboTax prepare one. See here for more information. You can also use the TurboTax W-4 Calculator. 

• If it is allowed but we need to take additional steps, what should we do?

It's not allowed.

Best wishes for your upcoming family event!

@john307sf 

[john307sf]

Thank you @MonikaK1  for the detailed response—I appreciate the clarification!

I now understand that we cannot split the Child Tax Credit when filing Married Filing Separately. However, I wanted to ask about this part of your answer:

"By claiming the credit on a Separate return, you can only receive half the amount of the credit (up to $1,000) you would receive on a joint return."

I had thought that even under Married Filing Separately, one spouse could claim the full $2,000 credit (while the other spouse does not claim it at all). My spouse and I would agree that only one of us will claim the child as a dependent.

Can you clarify if this is incorrect? If one spouse claims the child as a dependent, does that spouse still receive the full $2,000 Child Tax Credit, or is it automatically reduced to $1,000 because we are filing separately?

For additional context, this is our first child, and we both live together.

Thanks again for your help!

[MonikaK1]

Thank you for the follow-up question. Yes, you may be able to get the full $2,000 on one return. It is advisable to test both scenarios (separate vs. joint) before deciding.

If you and your spouse are using Married Filing Separately filing status, then you either both need to itemize your deductions, or you both use the standard deduction for Married Filing Separately.

Review your entries in the Personal Info section of TurboTax. These entries determine what filing status TurboTax will use and whether TurboTax will use itemized deductions or the standard deduction. 

If you file separately, TurboTax will ask you whether the child stayed more nights with you vs. the other parent and the answer affects whether you get the dependent on your return.

When you select Married Filing Separately, TurboTax asks follow-up questions. If you select that either you or your spouse itemize deductions, TurboTax displays the following statement: "Note: You both must itemize your deductions on each of your returns, or both of you must take the standard deduction. If only one of you wants to itemize, you should consider filing as Married Filing Jointly."

Depending on other factors, it may still be better to file jointly. If you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), you will need to split your community income evenly even if filing separately; the rules vary by state. Also, some tax benefits aren't available for Separate filing status.

You can use TurboTax Online to test different scenarios before deciding to file jointly or separately. Click here for more information from TurboTax on how to decide which filing status to choose.

Click here for tax tips for community property states.

@john307sf