Monmouth County Attorney for Taxes in Uncontested Divorces
You and your spouse have decided to part ways, and you have agreed to work together and come up with a settlement agreement for the court’s approval. Uncontested divorces are typically less expensive than traditional litigation, and you can usually obtain your divorce much quicker than you could by going to court.
However, as you navigate your uncontested divorce, you will have many things to consider, and one of the main issues you will need to understand is how your divorce will affect your taxes.
For a detailed explanation of how your divorce will affect your taxes from an experienced Monmouth County uncontested divorce attorney, you can reach out to the Law Office of Andrew A. Bestafka, Esq. at (732) 898-2378 to request a confidential consultation.
Tax Considerations in Uncontested Divorces
Your divorce will affect virtually all areas of your life, and that includes your taxes. As you work through your uncontested divorce, you must keep the following in mind:
Your Filing Status
When you were married, you and your spouse probably filed your taxes jointly. However, when your divorce is finalized, you will no longer have that option. If you finalize your divorce by December 31 of that tax year, you will file your taxes as “single” or “head of household.”
If you were still legally married on December 31, you have the option of filing jointly with your spouse. If you do this, you will receive only one refund or one tax bill, depending on your circumstances. You can also file as “married filing separate,” and both you and your spouse will each have to report your own income, deductions, exemptions, and credits. You will also each be responsible for only the taxes owed on your own returns.
If you are filing as single, you may claim yourself as an exemption on your tax return, but you must file jointly if you wish to claim an exemption for your spouse. You may also claim exemptions for any children you claim as a dependent, but you can never claim your spouse or ex-spouse as a dependent.
For couples with children, the custodial parent, or the parent the child lives with more than half the year, is allowed to claim the children as dependents for exemption purposes. Only one parent can claim a child as an exemption, meaning that you and your spouse cannot both claim the same child on your separate tax returns, even in joint custody situations.
To make things fairer, the IRS allows divorced parents to alternate who claims the child as an exemption, and couples with two or more children can split it up so that one spouse claims one child and the other spouse claims the other. Since the custodial parent has the primary right to claim children as exemptions, they will have to submit Form 8332 to release their right to claim the child on their taxes so that the non-custodial parent can claim them.
You may claim a child as a dependent on your tax returns under the following circumstances:
- The child is under 19 years of age at the end of the tax year or 24 years old if a student.
- The child must have lived with the parent for more than half of the year.
- The child does not provide their own support.
- The child does not file taxes or files only to receive a refund.
In many cases, the custodial parent is also allowed to receive financial support for shared children from the other parent. The court will calculate child support payments using an established formula that takes into account both parents’ income and ability to support their children.
If you are the custodial parent who receives child support, you do not have to pay taxes on the money you receive, and you do not have to report it on your taxes. Likewise, the parent who pays child support cannot claim these payments as deductions, and they will not report them on their tax returns.
Alimony and Spousal Support
Along with child support, a spouse may also receive alimony, or spousal support, from the other under certain circumstances. If you receive alimony payments, you will have to claim them as income on your tax return. Since this additional income could affect your tax bracket and the amount of taxes you will have to pay, you will need to calculate the estimated taxes you will have to pay on your taxes throughout the year or increase the amount your employer withholds in taxes by completing an NJ-W-4 form.
If you are the spouse paying alimony, you can claim those payments as exemptions on your tax return. This only applies to required alimony payments and does not pertain to any money you provided voluntarily to your ex-spouse.
Your Home, Property, and Other Assets
During the divorce process, you will have to divide all marital assets, including your home, cars, and any other valuable possessions. New Jersey is an equitable distribution state, which means the court will approve an equitable distribution of marital assets to each spouse in a divorce, not necessarily an even 50/50 split.
If you and your spouse decide to sell your home, you may receive considerable profit from the deal, and you will have to consider your capital gains. If you sell your home after your divorce and you meet the qualifications for capital gains exclusion, you each can exclude half of the amount of the capital gains you received from the sale, up to a maximum of $250,000.
If you received the home as part of the property division settlement but didn’t take ownership of the home until after your divorce, you can exclude $250,000 maximum as a capital gain. If you both decide to maintain ownership of the home following your divorce, you will each have an equal claim to the property for property tax deductions.
Work with an Experienced New Jersey Divorce Attorney
Your rights and responsibilities with regard to your taxes following divorce are very important for you to understand and follow to avoid penalties, fees, and other issues.
For help, you can reach out to the Law Office of Andrew A. Bestafka, Esq. at (732) 898-2378 to request a confidential consultation. We have helped thousands of clients throughout Monmouth, Ocean, and Middlesex Counties since 2008, and we are ready to help you get the results you deserve from your divorce.