New Jersey residents who are ending their marriage should also prepare for the variety of tax implications that this change brings. Being ready for these changes can help avoid some financial pitfalls post-divorce.
The first tax change, the filing status, might seem obvious. Once a couple divorces, they are no longer able to use the married filing jointly or married filing separately statuses. They have to file individually or as head of household if they have dependents living with them. This is true even if the divorce was finalized on the last day of the tax year. A variety of tax breaks will also be affected, as only one person is able to claim the child tax credit and only the person who keeps the house is able to use the mortgage interest deduction, for example.
Divorcing parents will also encounter changes related to dependents. The parent with primary physical custody is the one who claims the children as dependents. However, in some cases, the parties might agree to have the other parent claim the children as part of their divorce settlement. In those cases, IRS form 8332 must be filed. If there is alimony involved, it is taxable to the recipient and deductible by the payer. Child support is neither, however.
Figuring out the tax implications of the financial changes brought about by divorce is important for each person’s financial health. In this situation, a person might benefit from the advice a lawyer with family law experience can provide about the process and how to prepare for the changes.
