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Understanding how divorce will impact taxes

For most New Jersey residents who are going through the end of a marriage, their upcoming tax return is the last thing on their minds. It is important, however, to think about the impact that a divorce will have on one's tax obligation in the years to follow. That understanding can help both spouses to plan for their financial futures. 

One of the most basic changes is in each party's tax filing status. In the eyes of the IRS, a person is considered to be unmarried for the entirety of the year in which their divorce is made final. That means that each party will have to file as "single" or "head of household," depending on whether their children are living in their home. 

Another issue involves which parent will claim their child or children as dependents on their tax return. Many people assume that the custodial parent is automatically entitled to claim the kids as dependents. In reality, this is an issue that can be negotiated like any other. Often, one parent can reap a far greater benefit from claiming dependents than the other.  

For those in New Jersey who are preparing to divorce, thinking about tax matters can help them to prepare for the months and years to come. No one likes unwelcome surprises, especially at tax time. With a little advance planning and minimal effort, it is possible to create a post-divorce budget that includes all aspects of each party's financial standing, including taxes.

Source: madison.com, "Getting Divorced? Here Are 4 Ways Your Taxes Will Change", Wendy Connick, Sept. 24, 2017

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