Divorce is not an easy life event to handle at any age. Whether you’ve been married one year or 50 years, realizing that it’s time to file for divorce can be upsetting, disappointing, and overwhelming all rolled into one. Aside from finding income, a new place to live, and handling child custody issues, you will also need to learn how to file your taxes differently once your divorce is finalized. That is why the team from The Law Offices of James C. DeZao, P.A. has put together this guide to understanding divorce and taxes.
You Need to Choose a New Filing Status
One of the first things you need to change when filing a tax return for the first time is divorce and taxes filing status. You no longer can file as “married filing separately” or “married filing jointly.” You must now choose to file as either “head of household” or “single.” In order to file as head of household, which comes with major tax benefits, you must meet the following requirements:
- You are not married as of December 31 of the year for which you are filing a tax return
- For the year in which you are filing, you must have paid half the cost of keeping a home
- There is a ‘qualifying person’ who lived with you for at least half of the year (child away at school, married children claimed as your dependents, or parents whom you support and claim as dependents)
Splitting Debt in Divorce
Another important aspect of a divorce is splitting the marital debt when going through a divorce and filing taxes. Marital debt is any debt accrued during the length of the marriage. This debt stops on the date in which you separate from your spouse. The court will determine how the debt is divided—including credit card debt—and will ultimately decide who is responsible for paying the creditors what they are owed.
Child Tax Credit and Divorce
As you move through the days and months following your divorce, you need to explore child tax credit and divorce. Only one parent can claim children as dependents after going through a divorce, and that parent is the one who is the custodial parent. Why? The custodial parent is the parent who the child lives with the most during the course of the entire tax year. When filing your return, be sure to claim the child and dependent care credit as well as the earned income tax credit.
Paying Taxes on a Divorce Settlement
Under the new federal tax rules, the person who pays alimony to a former spouse cannot deduct these payments on their tax returns. At the same time, the former spouse who receives alimony does not have to pay taxes on this income when looking at a divorce settlement and taxes.
Newly Divorced in New Jersey? Speak to an Experienced Family Law Attorney Today
If you are newly divorced in New Jersey, you need to speak to an experienced family law attorney about your situation. The team from The Law Offices of James C. DeZao, P.A. will make sure you are heard in all of your concerns. Aside from being a partner you can count on, our team will help explain the tax laws, how they impact you after divorce, and what you should do if you are going through a divorce and have taxes owed. Call our office at (973) 358-6134 to schedule a free consultation today.