As we are writing this blog Congress is finalizing the new AMERICAN RELIEF ACT 2021 to send to the President’s desk for signature. Because the final form of the bill is subject to final approval by the House of Representatives, and because we have not read the bill, itself, we offer this information based upon the reports and analysis of public reporting in the Washington Post and other publications.
In this 2-part blog, we have selected four areas of the plan to highlight because the changes in these four areas will have direct impact on your divorce finances, especially Child Support and Spousal Support. This is because ascertaining your actual income and calculating your post tax net income has a direct bearing on calculating these amounts.
We offer this as general information only. This is not legal advice. For individual advice about your situation, please consult with a divorce professional like a collaborative lawyer or divorce financial planner.
As a quick primer on these matters, you may want to glance at these blog posts:
- Child support
- Stimulus and child support
- Alimony & long-term marriage
- Custody and visitation (also, Parenting Plans, Co-Parenting Plans, and Impacts on Children)
The areas highlighted in Part 1 were unemployment benefits and the stimulus checks. Following you will find information on:
- Child tax credits
- Health insurance expansion
Each area begins with bullet points summarizing the changes in each area. Below the bullet points we include brief comments in italics regarding how the changes may impact your situation.
Here we go.
- Child tax credit:
- Under the plan, most Americans would receive $3,000 a year for each child ages 6 to 17, and $3,600 for each child under age 6.
- The provision in the bill would last one year and be sent via direct deposit on a “periodic” basis. It is also a major expansion of the existing child tax credit, which currently provides $2,000 a year for children from birth through age 16.
- More regular payments are intended to help offset costs families face day to day, instead of sending families one annual payment.
- Calculate how much you would get from the expanded child tax credit
A tax credit is not income, but it does affect the calculation of your after tax net available for calculating support. The challenge, again, in receiving a larger tax credit here, more income is sheltered from taxes making more income available for support calculations. In many cases either parent may qualify for the child tax credit. The increase in this tax credit results in more money being available for the children.
Finally, only the parent who claims the dependency exemption will receive the stimulus payments for your children. Both parents will not receive a check for the same child. This probably raises a ‘fairness’ issue in the other parent’s mind, but that’s how it works. Working out the ‘fairness’ issue is a matter between the parents. To maximize the value of the child tax credit, if both spouses are eligible, we see many spouses working together with a divorce financial planner or trusted CPA to crunch the numbers to see who gets the greater overall tax benefit from claiming the tax credit with the understanding the benefit will be shared in a way that both parents realize a better support allocation.
- Health Insurance expansion:
- The plan will extend health insurance or reduce the cost of insurance to millions of Americans by expanding Affordable Care Act [ACA] tax credits and subsidizing COBRA coverage.
- Eligible laid-off workers may not have to seek out a new health plan at all. The stimulus bill would also subsidize the entire cost for laid off workers eligible for COBRA coverage to stay on their employer’s health plan until September 2021.
- The ACA enrollment period is extended. The federal ACA marketplace, and many states, are open for a special COVID-19 enrollment period through May 15.
- ACA tax credits are expanded. Currently, people are eligible for ACA tax credits only if their annual income is within 400% of federal poverty, about $51,000 for an individual. The 2021 plan eliminates the income cap, making more people eligible for a reduced health insurance premium, the amount you pay per month for the plan.
- Read more here.
Historically, health insurance is one of the thornier budget issues for any family. An employee who loses a job [involuntary] is eligible to maintain the same employer provided plan for 18 months, if they pay the premiums. The average premium for employer provided healthcare coverage in 2020 was $7,470 for an individual and $21,342 for a family. Under the AMERICAN RELIEF ACT 2021 choosing COBRA is really a no brainer – it’s free until September 2021.
Beware: If the employee spouse has not lost their job [and coverage] the non-employee spouse will lose their coverage when the divorce becomes final. The non-employee spouse will also have COBRA rights. However, nothing in the AMERICAN RELIEF ACT 2021 provides a subsidy for the non-employee spouse. Check with your employer for the future cost of COBRA. And then shop it around – including through the expanded ACA!
The state or federal ACA Healthcare Exchanges offer subsidized premiums for those who qualify based on income. However, for 2021, the income cap has been removed. To allow more people to take advantage, a new enrollment period has opened of which you need to remain aware. The AMERICAN RELIEF ACT 2021 extends the enrollment period through May 15, 2021.
Healthcare planning and budgeting is a family problem to solve, especially during and post-divorce! Providing [orders] for healthcare for the kids is a requirement in a divorce. If either [or both] spouse lose healthcare during or post-divorce, it is a budgetary need which will affect, among other considerations, the need for and ability to pay for spousal support. Carefully consider all your options.
For assistance with your child support and other family law questions, contact us at Family Peacemaker for a free one-hour consultation. Family Peacemaker provides mediation and collaborative family law services in Orange County and the surrounding areas.
This article is not legal advice. It is general information. You should not rely on it regarding your specific situation. Please seek individual consultation if you have questions about your situation.