Divorce and Taxes: Financial Issues and Family Law
Divorces and separations can be complicated. Emotions run high and lives are changed in the process. Even amicable splits can be complicated, which is why it's so important to hire an experienced attorney familiar with New Jersey divorce law. This can make all the difference for you, your spouse, and even your children.
While many people focus on the divorce itself, it's also important to consider the impact that your divorce will have on your taxes. Let's consider a few key factors below.
Changes to Your Filing Status
Your filing status is one of the most important tings to consider about divorce and taxes. In essence, if you sign divorce papers at any point during the tax year, your filing status for that year is single. Even if the divorce is official on December 31st of the previous year, your filing status is single.
This can have a major impact on your finances and how you film your taxes, which is why proper divorce planning is important.
Claiming Children as Dependents
Child custody can be a major issue in divorce proceedings, especially given all that is involved when it comes to visitation rights, legal custody, and so forth. In addition to this, parents will need to figure out who gets to claim a child as a dependent after the divorce.
Some divorced couples who split amicably are able to make an arrangement in which they alternate who gets to claim dependency from year to year. These arrangements may not work for all couples, however, leading to a number of legal disputes and subsequent tax issues.
Alimony and Child Support
Child support and alimony payments are pretty standard when it comes to divorce cases, though they can lead to some complications when it comes to filing taxes:
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Alimony – Alimony payments are taxable to the recipient, and tax deductible by the person paying it.
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Child Support – Child support payments are not taxable income for the recipient, and it is not tax deductible by the person paying it.
Keep in mind that if certain types of family support payments are bundled together as part of a divorce agreement, the amount may be taxable and tax deductible like alimony. This depends on the nature of the support, of course.
How Assets Are Divided
As assets are divided, this can take a toll on your overall taxable income and tax bill. This is especially true when properties are involved and disputed in a divorce. Depending on who winds up with a property, their taxes may be positively or negatively affected, particularly when it comes to mortgage interest deductions.
Possible Tax Deductions
There are potential tax deductions that can be made as a result of a divorce and even after a divorce has been finalized. For instance, legal fees pertaining to the tax consequences of a divorce may be used as an itemized deduction in certain cases. The same is true with legal fees used to obtain alimony payments.
Following a divorce, a parent may be able to include a child's medical costs as a medical expense deduction even if the former spouse has custody of the child.
How a Divorce Attorney Can Help
As you can imagine, the tax implications of a divorce can be extremely complicated, which is why working with an attorney is so crucial. An experienced divorce attorney can help work out a situation that is beneficial in the short term and in the long run, and can also offer insight into tax laws and considerations when filing. This peace of mind and proper foresight can prove invaluable.
Contact the Law Offices of Jeffrey W. Goldblatt
To learn more about your legal options following a divorce or separation, be sure to contact an experienced family law attorney today. The team at the Law Offices of Jeffrey W. Goldblatt are here to help you through the complexities of the legal process.
