No one likes paying taxes, and like practically everyone else, you probably look for ways to lower the amount you owe the IRS each year. This is where tax credits come in. They lower the amount of taxes you have to pay to the IRS, dollar for dollar. Some credits are even "refundable"--the IRS pays them to you even if you owe no income tax.

Some of the most valuable credits are given to parents to help them cover the costs of raising and caring for their children. These include the Child and Dependent Care Credit, the Child Tax Credit, and the Earned Income Tax Credit. But what happens when parents get divorced or separated? It's often difficult to figure out who can take these credits because of the many special rules that apply. However, these credits can have a huge impact on your tax bill. So it's wise for divorced or separated parents to know how and when they can take them.

The Child and Dependent Care Credit

The Child and Dependent Care Credit helps you cover the costs of child care you have to pay so that you're able to work or look for work. Care includes daycare for your child, for example. The credit amount is equal to 20% to 35% of your child care expenses, up to $3,000 for one child and up to $6,000 if you have more than one child. The exact percentage is determined by your income.

Children Covered by the Credit

For most taxpayer-parents, the credit applies to a child who:

• lived with you for over half the year
• qualified as your dependent, and
• was under 13 years old or disabled when the care was provided.

Special Rules for Divorced or Separated Taxpayers

Special rules apply for divorced or separated taxpayers claiming the credit. Generally, only the custodial parent can claim the credit. Even if the custodial parent releases or gives the noncustodial parent the right to claim the dependency exemption for the child, the noncustodial parent still can't claim the credit.

Also, you may be able to claim the credit even if your child isn't your dependent so long as all other requirements are met and:

• you're the custodial parent
• you had custody of the child for more than half the year, and
• you or your ex-spouse provided over half the child's support.

There are other requirements that need to be met before any taxpayer-parent may take this credit. The IRS has an online tool you can use to see if you qualify. Or you can talk to your tax attorney.

Child Tax Credit

The Child Tax Credit gives taxpayer-parents with incomes below certain amounts a $2,000 credit for each qualifying child who is under age 17. Up to $1,400 per child is refundable. This means you can get up to $1,400 from the IRS even if you owe no taxes all. However, the actual refundable amount depends on your earned income (generally, wages, salary, tips, or net earnings from self-employment).

A child qualifies you for this credit if he or she:

Special Rules for Divorced or Separated Taxpayers

The custodial parent usually takes this credit. However, the noncustodial parent may take it if the custodial parent releases the dependency exemption to the noncustodial parent.

Also, as a single taxpayer, the credit is phased out if your adjusted gross income is over $200,000. The credit is not available at all if your AGI exceeds $240,000.

The IRS has an online questionnaire you can complete to determine if you qualify for the child tax credit.

Earned Income Tax Credit (EITC)

Parent-taxpayers may be able to claim the earned income tax credit (EITC) based on their earned incomes. Basically, the EITC is a tax credit for workers with low wages. Whether any taxpayer can take the credit depends directly on the taxpayer's earned income and adjusted gross income. For parents, the amount of the credit depends directly on the number of children - the more children, the higher the credit.

Like the other credits, your child must be a qualifying child in order for you to be eligible for the increased credit amounts for taxpayer-parents. The child must:

Important points to know about the EITC if you're separated or divorced are:

• Only the custodial parent may take the EITC. A noncustodial parent can't take the credit even if the custodial parent releases the dependency exemption
• For EITC purposes, alimony and child support paid to you is not "earned income" (even though alimony paid to you is taxable income for divorces finalized before 2019)
• You may be able to take the EITC based on your own income, even if your ex-spouse claims the EITC as the custodial parent
• Even if you're the custodial parent with a qualifying child and satisfy the other EITC requirements, you can't claim the EITC if you are someone else's qualifying child, such as if you and your child live with your parents after the divorce.

The EITC can be complicated for any taxpayer. In fact, taxpayers claiming the credit when they're not entitled to is one of the most common errors found by the IRS. For this reason, taxpayers who take the credit are audited at a much higher rate than those who don't. Before taking or skipping the credit, you can use the IRS online EITC Assistant to see if you qualify, or check out IRS Publication 5334, Do I Qualify for EITC?, or talk to a tax attorney or another tax professional.

Be Sure Before Filing

Divorce or separation can have a big impact on your tax credits. You'll pay more taxes if you don't take credits you're entitled to. On the other hand, you could face big fines and penalties by taking credits you're not supposed to take. The divorce was stressful enough. Don't let it take another, bigger chunk out of your wallet. Make sure you understand the tax laws or get help from a tax law attorney before you file.