Filing taxes after divorce seems like another complicated process. It can be, especially if you have not brought your accountant or tax planner into the conversation until now. Understanding your IRS tax filing status after divorce is important as it influences your financial obligations and the taxes you may owe.

It’s best to work with your team to determine your tax obligations in every situation. Your Jersey Coast Family Law lawyers can answer many questions for you and help you prepare for what comes next.

Overview of IRS Tax Filing Status Options

Be sure to always defer to the IRS guidelines for filing taxes after divorce or separation. The first step is to determine your IRS tax filing status.

In situations where your divorce is final before the end of the year, you cannot file a joint return for that year. That means you cannot file a Married Filing Jointly or Married Filing Separately tax return even if you had in prior years.

It may be possible to file as head of household when you provide a home for your child. If it applies to your situation due to custody arrangements, filing as head of household could lower your tax liability than filing as single.

Also note that if you divorce and then remarry someone else before the end of the year, you can file a joint tax return. In this situation, your second marriage would allow you to qualify for either of the joint tax filing options.

In many situations, it is possible to file single, which may benefit you if you are now living alone and do not have other dependents.

Keep in mind that when making the decision of which tax filing to take, you should consider:

  • The impact of one filing status over the other on tax liability
  • The deductions that may change now that you are filing separately
  • The credits you may or may not qualify for any longer if you are divorced

These aspects change widely from one situation to the next. The amount you earn, your living arrangements, the types of deductions you have, and your financial obligations can all play a role in the decisions made here. It is always a good idea to speak to your tax professional in the first year you are filing for taxes after divorce.

Choosing the Right Filing Status During and After Divorce

There are several situations to take into consideration when determining your tax filing status.  As noted, you cannot file married filing jointly if you are no longer married at the end of the year. You cannot file married filing separately if you are divorced by the end of the tax filing year.

What if your divorce is not yet finalized?

In this situation, you may want to consider whether filing married filing separately vs head of household would be the best choice for you. If you are splitting and separated from your spouse but have not completed a divorce by the end of the tax filing year, it is possible to file married filing separately as your status. This may be beneficial in situations where your tax liabilities, deductions, or credits are favored in this manner.

Filing a head-of-household claim is more beneficial than filing a single claim if you have a dependent living in your home. Thanks to your dependent, this may lead to a bitter standard deduction for you and easier tax brackets. To file as head of household, you must have had a family member dependent on you for at least half of a year, and you paid for more than half of the upkeep of the home.  To file a head of household claim, you must:

  • Must be unmarried or considered unmarried on the last day of the tax filing year
  • Have a qualified person living in your home for at least six months
  • Paid more than half of all costs to maintain the home for at least a year
Common Tax Filing Challenges for Divorced Couples

Tax filing options after divorce should be considered based on what lowers the financial tax obligations for the family. Understanding New Jersey divorce tax implications is critical, but some particular areas of complexity include the following:

  • Disagreements over who claims the dependents. The court will determine which parent can claim the child as a dependent in the divorce and child custody processes. That should always be followed. Typically, the court will assign this to the custodial parent unless otherwise noted.
  • Alimony may impact your tax obligations. You may be able to deduct the payments you are making. The IRS only considers payments made to the ex-spouse if they are paid in cash (rather than in the receipt of property or assets) and must be written in the divorce decree. If you are the spouse receiving alimony, you may be required to pay taxes on it.
  • Asset transfers, or the division of assets, can also be considered. The person receiving assets in the marriage through a divorce decree does not have to pay taxes in that switch. However, if the value rises substantially, you may be required to pay capital gains taxes on that increased growth.
Navigating New Jersey Divorce Tax Implications

Choosing an IRS filing status during divorce is confusing. What makes it the most challenging is that you need to consider other factors as well, such as dependents, assets and investments, credits, and tax deductions. There is no single rule that applies to every situation.

As a result of this, it is critical to contact your New Jersey family lawyer to discuss your case. Then, discuss your case with your tax professional, who can often help you navigate all your options for reducing your tax liability.

Contact Jersey Coast Family Law now at 732-361-4718 to learn more about how we can help you. Our attorneys are skilled professionals who can help you make the best decisions for your future.

 

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