How divorce may impact a tax return

On Behalf of | Feb 2, 2022 | Property Division |

New Jersey is an equitable distribution state, which means that marital assets are not necessarily divided in a 50/50 manner in a divorce. Instead, they will be allocated based on a number of factors including your age, ability to work and if you have custody of any minor children.

Dividing assets could trigger a taxable event

In some cases, you will sell assets such as a home or stock portfolio as part of the property division process. The funds raised from such a sale will typically be divided between yourself and your spouse. However, selling an asset that has appreciated in value may result in a capital gains tax bill. Ideally, you’ll consider the after-tax value of an item before agreeing to liquidate it or transfer it into your name as part of a divorce settlement.

Obtaining custody of your children could impact your tax return

If you have sole physical custody of your children, you’ll likely be able to claim them as dependents on your tax return. Furthermore, you’ll likely be able to take any credits or deductions that are reserved for the caregivers of minor children. Of course, it may be possible to allow your child’s other parent to take certain credits on a temporary or permanent basis. It’s important to note that your former partner’s income after taxes will be a key variable when it comes to calculating his or her child support obligation.

A divorce may have a significant impact on your finances both now and in the future. Therefore, you should thoroughly review a settlement to determine whether it meets your needs before you choose to accept it.

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