As tax season approaches, individuals who have recently gone through a divorce may find themselves facing unique challenges when filing their returns. Divorce can have significant implications for your tax situation, affecting everything from your filing status to deductions and credits. Let’s take a look at how divorce impacts your tax returns, as well as some things to keep in mind when filing.
Does Getting Divorced Impact Your Taxes?
Absolutely. Getting divorced will have a profound effect on your tax obligations and filing status. Receiving alimony and child support payments will also change you how file. For example, you may need to adjust the amount of tax withheld from your paycheck after separating or divorcing, and that may alter how much you receive in returns or what needs to be paid to the IRS.
Will Your Filing Status Change During Tax Season?
Your filing status is determined by your marital status as of December 31 of the tax year. If your divorce is finalized before the end of the year, you will likely need to file as single or head of household, depending on your circumstances. However, if you were still legally married on December 31, you may need to file as married, either jointly or separately.
What About Same-Sex Couples?
For same-sex couples who have separated prior to filing their taxes, the rules are different. You may not be able to file using married filing separately or jointly status. However, you may need to report your income and expenses, depending on where reside.
Do You Have to Account for Child Support and Alimony on Your Taxes?
Yes, you do. Here is a breakdown of how these factors may impact your taxes:
Alimony
In New Jersey, alimony payments made to a spouse are deductible by the payer and considered taxable income for the recipient. This means that if you’re the one paying alimony, you can deduct those payments from your taxable income, potentially reducing your overall tax liability. Conversely, if you’re the recipient of alimony, you must report those payments as income on your tax return.
Child Support
Unlike alimony, child support payments in New Jersey are not tax-deductible for the payer, nor are they considered taxable income for the recipient. This means that neither the parent paying child support nor the parent receiving it needs to report these payments on their tax return.
Child Dependent Status
When it comes to claiming dependents on your tax return, custody arrangements play a significant role. If you have custody of your child according to the terms of your divorce or separation agreement, you typically have the right to claim them as a dependent on your tax return. This allows you to take advantage of valuable tax credits and deductions associated with dependent children.
However, it’s essential to note that the custodial parent may choose to release the right to claim the child as a dependent to the noncustodial parent. This decision can have significant implications for both parties’ tax situations and should be carefully considered in light of each parent’s financial circumstances.
Can You Receive Tax Credits?
Claiming a child as a dependent may make you eligible for the child tax credit, providing additional tax benefits. However, eligibility for certain credits and deductions may vary based on your filing status and other factors. For this, it is best to speak with an accountant or legal representative who understands taxes and the requirements for such credits to be obtained.
What Happens if You are Retired and Recently Divorced?
Divorce can also impact retirement accounts, with ex-spouses potentially entitled to a portion of the account balance under a qualified domestic relations order (QDRO). Payments received under a QDRO may be taxable unless rolled over into an IRA.
Additionally, if property transfers occur as part of a divorce, there is usually no recognized gain or loss on the transfer of property between spouses or former spouses. However, it may be necessary to report the transaction on a gift tax return. Additionally, retirement plans may be impacted by divorce, with ex-spouses potentially entitled to a portion of the account balance under a QDRO.
Contact a Divorce Lawyer in New Jersey Today
Navigating the tax implications of divorce can be complex, but you don’t have to do it alone. Consulting with a knowledgeable divorce lawyer can help ensure that you understand your obligations and maximize any available tax benefits. If you’re facing divorce or have recently finalized your divorce, contact Ziegler Law Group, LLC today to schedule a consultation with one of our experienced attorneys. We’re here to help you navigate the process and protect your interests every step of the way.
Reach us today by calling 973-533-1100 or by filling out the online form
