The following questions are similar to those often posed by our clients.

Divorce and Income Tax: Frequently Asked Questions

Question #1: I filed for divorce in 2016, but our divorce was not final until early 2017. Should I file as married or single?

Answer: Your marital status on December 31 of the tax year determines your filing status for the entire year. You have a choice of filing a joint return or a separate one; however, in either case, your status would be “married.”

Question #2: My ex and I both want to file as head of household. Can we both claim this status? What are the requirements?

Answer: Only one of you can file as head of household. In order to file as head of household you must meet these two requirements:

• You were responsible for more than half of the upkeep on your home for the year in question.

• You had a qualified child or other dependent living with you for more than six months of that calendar year.

Question #3: What are the benefits of filing as head of household?

Answer: The head of household is entitled to a larger standard deduction and, therefore, possibly a lower tax rate and/or a better chance of getting a refund.

Question #4: My ex-spouse and I have joint custody of our child. Who can declare him as a dependent? Can we split the exemption?

Answer: According to IRS law, the custodial parent gets to declare the child as a dependent. If you share custody, then the parent with whom the child spent the most nights is entitled to the exemption. Only one parent can claim the exemption in any given year. The exemption may not be split.

Question #5: My ex-spouse and I agreed to alternate taking the dependency exemption when we file our income tax return. Will the IRS accept this?

Answer: Even if your property settlement agreement or divorce judgment calls for this or any other arrangement, the IRS may not allow it unless the custodial parent fills out Form 8332 and attaches it to his or her income tax return. This form is a “Release of Claim to Exemption for Child of Divorced or Separated Parents.”

Question #6: I receive child support from my ex. Is this taxable income?

Answer: No, money received as child support is not taxable income, and child support payments are not tax deductible.

Question #7: Are my alimony payments tax deductible?

Answer: Yes, spousal support, or alimony, payments are tax deductible, but it is necessary to have the amount clearly stated in your divorce agreement.

Question #8: Do I have to pay taxes on money received as alimony?

Answer: Yes, money received as alimony is considered taxable income. Your ex must provide your social security number with his or her income tax return.

Question #9: Do I have to pay income tax on the assets I receive from equitable distribution of our marital property?

Answer: No, these are not considered new assets. However, if you later sell one of those assets, such as a stock portfolio, a piece of real estate, or a home, there may be tax consequences at that time. A qualified New Jersey divorce attorney can help you understand what is best for you at the time of your negotiation.

Question #10: I may have to cash out my 401(k) in order to pay my ex-spouse what was decided in our equitable distribution agreement. Will I have to pay a tax on this money?

Answer: The answer is yes, but…. You can avoid paying this tax if you transfer the money to your ex under a QDRO, or Qualified Domestic Relations Order, which gives your ex-spouse the right to the funds.

Question #11: As part of our equitable distribution agreement, I must transfer some funds from my IRA to my ex. Do I need a QDRO?

Answer: No, a QDRO is not necessary with an IRA; however, be sure that your agreement specifies the reason for this transfer.

Question #12: May I deduct payments made to my divorce lawyer on my tax return?

Answer: You may not deduct legal fees. On the other hand, you may deduct payments made to your attorney for tax advice pertaining to your divorce or for help getting or collecting alimony.

Preparing and filing your income tax return and dealing with divorce are both difficult. Taken together, the result can be overwhelming. Consulting a knowledgeable divorce attorney who works with financial experts can go a long way towards alleviating the stress.

This article is not meant to provide legal or financial advice. Contact the experienced New Jersey divorce and equitable distribution attorneys at Aretsky Law Group, P.C. They can answer your questions about divorce and taxes, equitable distribution of marital property, and other important issues.

There are many questions that must be considered. Here are 6 common tax filing questions that may impact divorced, separated or soon-to-be-divorced couples:

1. What is the appropriate filing status?
2. Who is head of household?
3. Who can claim the exception for a qualifying child?
4. Are alimony payments deductible?
5. Is child support considered income?
6. Are payments to my marital attorney deductible?

If you are unsure about how these tax questions might apply to you during times of divorce, we recommend that you consult either your tax attorney or your family law attorney. In the meantime, we offer a quick look and some answers that might help you address these questions:

Question 1: What is the appropriate filing status? Answer: If you were married and not legally separated on the last day of the calendar year, you are considered married. You would file as either married filing jointly or married filing separately. On the other hand, if you were considered unmarried on December 31 of that year, you must file as a single person.

Questions 2 & 3: Who is head of household? – Who can claim the exception for a qualifying child? Answers: Filing as head of household has several advantages. Most importantly, the standard deduction is higher and the tax rate is generally lower; also, the head of household is more likely to get a refund. Whether or not you are considered head of household depends upon several factors. In order to be deemed the head of household, you must be unmarried for the tax year in question and must have paid more than half the cost of keeping up your home during that year. Also, you must be able to claim a qualifying child or other dependent. That dependent must have lived with you for more than one half of that year. The custodial parent is usually the one who can claim the exemption for a qualifying child.

Questions 4 & 5: Are alimony payments deductible? – Is child support considered income? Answers: Alimony payments are tax deductible for the payer, and income from alimony is taxable for the recipient. Child support, on the other hand, is not considered taxable income for the recipient; therefore, child-support payments are not tax deductible. It stands to reason that recipients would prefer to receive more in the form of child support and payers would prefer to pay more as alimony.

Question 6: Are payments to my marital attorney deductible? Answer: Although legal fees to your attorney are generally not deductible, any fees you paid to your attorney for tax advice concerning your divorce are deductible. This includes fees paid because your attorney had to consult a tax expert for advice. You may also deduct lawyer fees that were paid in order to get or collect alimony. It is crucial that your divorce attorney keep an itemized accounting of the charges so that you have proof that the fees were used for these express purposes. For these and other deductions, you would have to itemize rather than take standard deductions. You will have to decide what is best for you.

Filing your income tax return can be a stressful, often confusing, task. The specific rules applying to divorced couples can make it even more disconcerting. If possible, we recommend that you consult either your tax attorney or your divorce attorney to be sure you follow and take advantage of all the provisions of the current tax code when formalizing your agreement and/or filing your tax return.

For additional information, see IRS Publication 504 for Divorced or Separated Individuals found here: https://www.irs.gov/uac/About-Publication-504