Divorced couples in New Jersey may know finances and tax status might change following divorce. Filing as a single person may differ due to income variation, loss of deductions afforded married couples and deductions for dependant children. The way tax matters are handled might be incorporated into the divorce agreement.
One area of potential contention is over deductions for dependent children. Deciding which parent will claim a child as a dependent is important since parents cannot split deductions on a single child. If one parent is considered the custodial parent, this might be clear cut. When parents share custody, it is more complex. Children taken as an income tax deduction are required to live with that parent at least six months out of the year. With equal custody, parents may decide to trade taking deductions on alternating years.
If the adoption of a child into the family was approved during the year, this entitles the head of household to a sizable deduction. If eligible, the deduction may reach $13,190 per year.
Some parents may be able to take advantage of a spending account at work, which allows them to deposit $5,000 per child to pay expenses. If a single parent earns under $279,650, the parent may deduct $3,950 off 2014 taxes. An additional $1,000 may be deducted by a parent earning up $75,000 for each child under 16. Other deductions are available for child care expenses, including after school and summer care.
Many parents incorporate tax deductions into the divorce agreement itself. An attorney’s advice may help a parent understand the implications tax issues have when he or she becomes a single parent. The attorney may help negotiate a reasonable plan for future tax deductions.