Tax Returns When Officially Divorced or Separated

How a Divorce or Separation Can Affect Your Taxes

New Jersey has historically enjoyed one of the lowest divorce rates in the U.S., and the cynic may surmise that it has a lot to do with just how expensive they can be in this region. The ideal for Bergen County divorce lawyers may be amicable divorces that allow clients and spouses to work together to mitigate their losses. Tax obligations for the year in which a divorce was finalized or a separation formalized is an oft-overlooked potential loss.

Filing Status: Single vs. Married

Many people believe that if they were married at any point during the year, then they are entitled to use that marital status on their returns. However, this is not the case. If there has been a separation maintenance decree prior to the end of the year, you must file as single or head of household. Likewise, if there is a divorce order by the end of the year, you must do the same. If, on the other hand, neither of these conditions are met, you must file as either:

  • Married filing jointly
  • Married filing separately

Dependents and Head of Household

Your divorce decree may explicitly establish which parent can claim a child as a dependent. If the decree does not specify, then the parent with custody is entitled to claim them. If the parents share joint custody, then the parent who is on record for the most days of custody that year is entitled. To choose head of household as your filing status, you must have a dependent that qualifies and pay more than 50 percent of the required support. Although filing as head of household generally allows for a larger standard deduction than filing as single, this is not necessarily true in the year a divorce was finalized or a separation formalized, so be sure to have your tax accountant explore this thoroughly.

Availability of Tax Credits

Generally, you need to be the custodial parent or have the explicit right to claim a child as a dependent in order to qualify for a tax credit that requires a child or other qualified dependent. Even if you were a custodial parent for 364 days and your divorce was finalized on December 31st, you could lose your qualification and have no claim to neither refundable nor nonrefundable credits. Tax credits that could possibly be affected include the:

  • Child tax credit
  • Adoption tax credit
  • Earned income credit
  • Child care and dependent tax credit

Legal Fees

The IRS does not offer deductions for general legal fees or court costs related to a separation or divorce. It does, however, offer deductions for certain aspects of tax advice and legal representation related to alimony or spousal support. These aspects can include:

  • Counsel on separation
  • Counsel on divorce
  • Advice concerning income taxes
  • Guidance for property and estate taxes

Child Support and Spousal Support Tax Implications

Child support is generally not tax-deductible, but if you are the person receiving it, then it is not considered income and therefore not taxable. The IRS generally does not differentiate between concepts like spousal maintenance, spousal support and alimony. Such maintenance is a bit more complex. For divorces finalized prior to 2019, the paying spouse could deduct the amount paid and the receiving spouse had to claim it as income. For later divorces for the foreseeable future, the payer pays taxes on the income and the receiver does not.

The Local Representation You Need

If you are considering separation or divorce or have already begun down that road, then we encourage you to meet with a Bergen County divorce lawyer. At the Law Offices of Kelly Berton Rocco, our legal domain is NJ family law only, and we’d welcome the chance to consult with you and provide the representation you need. You can schedule your confidential, in-person consultation by contacting us via email or calling our Hackensack office at 201-343-0078.

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