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Men’s & Fathers’ Rights Divorce Lawyers by Schultz & Associates, LLC

Divorce & Family Law of New Jersey

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    • CARRIE S. SCHULTZ, ESQ.
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What Are the Tax Implications of Divorce?

Our New Jersey Divorce Lawyers Answer Some of Your Tax Questions

One of the most difficult aspects of a divorce is the financial challenges it can present, including when it comes to taxes. A common question is: What are the tax implications of divorce? Understandably, many people, like you, who are divorcing want to optimize their tax position and avoid paying too much to Uncle Sam. However, federal and state tax laws are very complex and frequently changing, and it can be difficult to understand how the laws affect your individual divorce.

Our divorce lawyers can counsel you on some issues regarding tax issues related to your case and help ensure that you get the most beneficial result for your situation. Of course, since we are not tax experts, it is critical that we work closely with certified public accountants, tax attorneys, tax planning strategists, and other professionals with expertise in the areas of state and federal tax laws to provide you the most comprehensive legal support possible.

When you need help with your divorce, including understanding its tax implications, contact [MFR] Men’s & Fathers’ Rights Divorce Lawyers by Schultz & Associates, LLC to arrange a time to speak with our experienced attorneys. You can reach out to our Hackensack law firm by calling (201) 880-9770. We are committed to excellence in the practice of family law—because family law is all we do.

Our Bergen County Attorneys Protect Interests of Divorcing Spouses

There are many tax implications of divorce that we can counsel you about generally based upon the intricacies of your specific situation. Some common issues that you may have concerns about include the following:

  • How child support does or does not affect you or the other parent’s taxes?
  • Who gets the dependent children exemption following divorce?
  • Do you have to pay Federal and/or State taxes on alimony and, if you are the payor, can alimony be deducted on my Federal and/or State income tax returns?
  • How tax debt is handled in divorce?

We can also address concerns related to possible tax consequences for divorces that occurred years ago, impact family businesses or retirement assets and other areas. Whatever concern you have about taxes and your divorce, you can rely on our knowledgeable Bergen County based attorneys to get you the answers you need. For general information about tax laws, at both the state and federal levels, you can also visit the New Jersey Tax Guide.

Tax Concerns for Divorcing Parents

Who Gets the Child Tax Exemption or Child Care Credit in a Divorce?

If you have dependent children and are divorcing, you may be wondering, who gets the Child tax exemption when parents divorce? What about the Child Care Credit? In general and according to the IRS rules, technically, the custodial parent, who is the parent the child lives with the majority of the time, is eligible for the exemption. However, that rule can change—and often does– in a divorce situation. In your divorce agreement, a lot of times, the parents agree to alternate exemption years with your former spouse. Your attorney may be able to help you negotiate an arrangement that is fair to both you and your spouse when it comes to child tax exemption credits.

As for the child care credit, the same philosophy may apply depending on the circumstances and whether the children are in child care and which parent is paying the lion’s share of that service.

Is Child Support Taxable?

People who pay and receive child support often have concerns about the tax implications of divorce on that support. Under both federal law and New Jersey state law, child support is not taxable or deductible on Federal and/or State income tax returns. In other words, if you receive child support, you do not have to claim it as income. On the other side of the coin, if you pay child support, you cannot deduct it from your Federal or State taxes.

Understanding Alimony and Taxes

While child support payments are not taxed and cannot be deducted, the same is not true for alimony. Alimony is taxable to the recipient at the State level. So, in New Jersey if you are the one paying alimony, that alimony is eligible to be tax deductible on your State returns The key is that for it to be deductible on your State returns, it must be made under the divorce decree—any extra payments made outside of the divorce agreement would not be deductible. However, in a stark contrast (and this is the bad news), at the federal level, alimony is no longer taxable to the recipient or deductible by the payor for divorce agreements executed after December 31, 2018. For agreements prior to that time, alimony was taxable and deductible accordingly and hopefully, your divorce agreement explicitly states so..

The impact of the above is significant when negotiating the terms of alimony in any divorce case. The reason that it is significant is the number has to be tax affected, so to speak, to account for whether one will be taxed at the State level or able to deduct the alimony at the State level, but a separate calculation because the Federal level does not permit same. This is where things can get complicated and having a knowledgeable attorney by your side to navigate this to ensure you are paying, or receiving, the objectively fair amount with all things considered, is very important.

EQUITABLE DISTRIBUTION & TAXES

Unlike alimony, equitable distribution settlement agreements are not a taxable event. It is important, however, that the split of marital assets and marital liabilities be expressly specified in a formal written document for it to be considered non-taxable. It would not be beneficial for you or your spouse to have verbal arrangements or “side deals” because not only does that create complications in the future, but it could also have negative tax consequences should anything be called into question.

Is Tax Debt Split in a Divorce?

There are many tax questions to be answered during divorce, and “Is tax debt split in divorce?” is one of the most common. Many people who owe taxes to the Internal Revenue Service or the state of New Jersey wonder whether tax debt is split in a divorce.

Like marital assets, which are subject to be divided in New Jersey using equitable distribution, debt incurred during marriage is also subject to division. This is generally true for tax debt as well as other types of debt. But like so many circumstances in divorce, the individual situation of you and your spouse and the reasons how and why that tax debt was incurred is important and critical to the analysis of whether your tax debt will be divided between you and your spouse in your divorce, or, perhaps the discussion is more about the percentage allocation of who owes what towards that debt.

For example, if back tax debt was incurred by a spouse prior to marriage, it may be considered separate debt because the marital enterprise had nothing to do with why that debt was incurred. If taxes are related to a separate business that one spouse owns and perhaps did not pay required taxes on, the non-business-owning spouse may have an argument that they are not responsible for the debt. However, if funds ‘saved’ from not paying the IRS was otherwise reallocated towards marital expenses and same could be proven, then one could argue the business tax debt is, in fact, a marital debt. In another example, if you and your spouse were married but filed taxes separately, you may not be liable for your spouse’s tax debt depending on the specific situation just like some of the other examples above.

Every individual’s situation is different when it comes to the area of tax debt in divorce. Once our attorneys learn all the details of your case, we can more closely advise you.

Are There Tax Advantages to Being Divorced?

If your divorce was finalized before the end of the tax year, you cannot file jointly. You will either file as single and lose the tax advantage, or file as head of household, depending on the circumstances. From the single filing perspective, there may not be a tax advantage to being divorced. On the other hand, if you and your spouse both had high incomes and are involved in a high-net-worth divorce, there could be some advantages to being divorced due to the potential marriage penalty, which, depending upon your income situation, can apply a higher tax rate to you and your spouse if you filed jointly then if you had been single and both filed that way. This is why we work closely with Certified Public Accountants and other tax professionals to request that they run hypothetical returns in varying methodologies to determine the most advantages approach for both you and your spouse. The other things to bear in mind is that there is significant financial exposure if one party decides to file single without the knowledge and consent of the other party and that choice of filing creates a higher liability or lower refund for the other party. The person who rushed to file could be on the hook to pay for the monetary difference to the other party.

Do You Have Questions About the Tax Implications of Divorce? Contact our Experienced Hackensack Divorce Lawyers to Arrange a Consultation.

Federal and state tax laws are dynamic, which is why you should speak to our attorneys if you have tax concerns that relate to your divorce. There are many issues surrounding taxes and divorce in addition to those discussed here. Is a lump sum alimony or equitable distribution settlement taxable? Do tax implications remain even long after the divorce is over? How does the timing of a divorce affect taxes? Once we meet with you and learn the details of your divorce, we can answer your questions about divorce and tax issues in New Jersey and help you develop a strategy that addresses your concerns.

Contact [MFR] Men’s & Fathers’ Rights Divorce Lawyers by Schultz & Associates, LLC to schedule a consultation with our experienced New Jersey divorce lawyers at (201) 880-9770 for help.

Stages of Divorcing a Narcissist
DivorceUncategorized
glmuser
26,Sep,22
Stages of Divorcing a Narcissist
Do you feel your needs are put last? Do you feel manipulated and degraded? Are you ready for the constant highs and lows to end? Divorce can be relatively straightforward or very complicated, depending on the personalities of the individuals involved. Ending a marriage to a narcissist is often among the most difficult of divorce
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What can I expect in My Divorce if my Spouse has a Personality Disorder?
DivorceUncategorized
glmuser
20,Sep,22
What can I expect in My Divorce if my Spouse has a Personality Disorder?
Personality disorders can wreak havoc in marriages, making life miserable for you and your children. It is not surprising that these mental health conditions are associated with higher rates of divorce, domestic abuse and other problems. But while divorce can be hard in any situation, divorcing a spouse with a personality disorder is often exponentially
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Divorce and Inherited Property
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26,Mar,20
Divorce and Inherited Property
Divorce is incredibly common in our country. According to statistics, Americans divorce at a rate of 2.9 per 1,000 people. If you are considering divorce, you likely have a number of concerns: Will you get custody of or visitation with your kids?  Will you have to pay alimony? What will your child support payments be
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5 Mistakes Men Must Avoid During the Divorce Process
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
17,Sep,19
5 Mistakes Men Must Avoid During the Divorce Process
Getting divorced is a process. But once it is over you will be forced to live with the decisions you made during the process for years – if not the rest of your life. As a result, when going through a divorce, you need to make smart decisions with your long-term best interests in mind,
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Can I Use My Wife’s Facebook Posts Against Her in Our Divorce?
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
06,Sep,19
Can I Use My Wife’s Facebook Posts Against Her in Our Divorce?
Your wife has always been active on social media, and all indications are that she will not be slowing down during your divorce. So, can you track your wife’s social media posts during your divorce? If you can, should you? Are there ways that you can use her Facebook and other social media posts to
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Divorced Fathers’ Rights During Summer Vacation
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
05,Sep,19
Divorced Fathers’ Rights During Summer Vacation
Information you need to know if you want to spend time with your child over the summer As a father, preserving your relationship with your children is one of the most important aspects of the divorce process. This includes not only the right to spend time with your children on a regular basis (whether that
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<br>You Were Cheated On! Now What!?
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
23,Jul,19
<br>You Were Cheated On! Now What!?
Rights in NJ Divorce if Your Wife or Spouse Committed Adultery According to surveys, as many as one in five Americans have admitted to cheating on their spouses. This may be a shockingly high number, but the reality is that many people have experienced the effects of infidelity firsthand in their own relationships and marriages.
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If I Cheated on My Wife, How Will This Impact My Divorce?
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
21,Jul,19
If I Cheated on My Wife, How Will This Impact My Divorce?
You cheated on your wife. It happened. You aren’t the first husband to have an affair, and you won’t be the last. According to Institute for Family Studies (IFS), 20 percent of men report “having sex with someone other than their spouse while married” – and those are just the ones who responded to a
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Divorce Preparation Checklist
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
20,Dec,18
Divorce Preparation Checklist
If you have decided to file for a divorce, it will be important to prepare in advance as much as possible. But don’t worry, this is not nearly as daunting as it sounds. While there are some steps you may want to take to make sure you are financially well-positioned for your divorce, in many
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Should You Block Your Spouse on Social Media During Your Divorce?
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
06,Dec,18
Should You Block Your Spouse on Social Media During Your Divorce?
It is hard to believe, but Facebook has only been around since 2004. Twitter was founded in 2006, and Instagram is less than 10 years old. Yet, today, these and other social media platforms play a central role in many people’s lives; and, with increasing frequency, they are playing a central role in many people’s
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How Will the Tax Cuts and Jobs Act Impact Divorcing Spouses in New Jersey?
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
08,Nov,18
How Will the Tax Cuts and Jobs Act Impact Divorcing Spouses in New Jersey?
Enacted in late 2017, key provisions of the federal Tax Cuts and Jobs Act for divorcing spouses are set to take effect on January 1, 2019. These changes have the potential to drastically impact certain financial aspects of divorce, and spouses who are currently contemplating a divorce in New Jersey will need to factor the
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7 Ways Friends and Family Can Help Individuals Coping with Divorce
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
13,Feb,18
7 Ways Friends and Family Can Help Individuals Coping with Divorce
Even for the strongest among us, going through a divorce is a difficult process. From dividing your property to making decisions that will determine how much time you get to spend with your children, nothing about a divorce is easy, and support from friends and family can go a long way toward helping individuals cope
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3 Things To Know About Child Custody If You Are Going Through a Divorce
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Carrie S. Schultz, Esq.
06,Feb,17
3 Things To Know About Child Custody If You Are Going Through a Divorce
When going through a divorce it is often common to have questions that you need to reach out for help.  When going through a divorce, one of the most common questions are dealing with children.  Children are the most important thing to keep in mind when entering into a divorce. 1.) Using Mediation for the
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What Should I Do if I’m Unhappy with the Results of a Motion
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
24,Jan,17
What Should I Do if I’m Unhappy with the Results of a Motion
If you’re unhappy with the results of a motion, you have two choices. You can either file a motion for reconsideration with that same judge – pointing out something relevant to the ultimate outcome of your case that he or she may have overlooked – or you can file an appeal with the appellate division.
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When Can I Start Using My Maiden Name After Divorce?
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
19,Jan,17
When Can I Start Using My Maiden Name After Divorce?
At the end of your divorce – as part of the divorce process – you absolutely may request that the court change your last name back to your maiden name (or to any name you desire) so long as you’re not doing so to avoid any creditors, liens, or judgments that may currently exist. Did
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Bergen County Divorce Lawyer on Your Spouse Moving Out and Wanting to Move Back In
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
12,Jan,17
Bergen County Divorce Lawyer on Your Spouse Moving Out and Wanting to Move Back In
One question I often get as a Bergen County Divorce Lawyer is, “My spouse moved out, but now wants to move back in. Is that allowed?” The answer to that question can be complicated. Technically, absent a temporary or final restraining order, that spouse is still entitled to live in the house. On the other
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New Jersey Divorce Attorney on Moving to Another State with the Kids Before the Divorce
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
02,Jan,17
New Jersey Divorce Attorney on Moving to Another State with the Kids Before the Divorce
As an experienced New Jersey Child Custody Lawyer, I am often asked if a parent can move to another state with their children before they initiate the divorce action. It is usually not permissible for a parent to relocate to another state, taking the child or children with them. Permanent relocation to another state prior
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New Jersey Divorce Lawyer Explains How Long You Must be a Resident Prior to Filing
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
26,Dec,16
New Jersey Divorce Lawyer Explains How Long You Must be a Resident Prior to Filing
Clients often come to me as a New Jersey Divorce Lawyer, to verify how long they must have lived in the state prior to filing for divorce.  In order to file for divorce in New Jersey, the filing party must have lived in the state of New Jersey for at least one year. The one
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How Does Divorce Mediation Save Money?
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
15,Dec,16
How Does Divorce Mediation Save Money?
One major question I get is whether or not people should go directly to mediation. While mediation is definitely a viable option in all divorce cases – and it can absolutely save you money – it has its proper time and place. In my opinion, a couple should go to mediation only after you and
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How Can I Get Divorced If My Spouse Moved Out of State with the Kids?
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
12,Dec,16
How Can I Get Divorced If My Spouse Moved Out of State with the Kids?
Divorce is complicated enough when spouses live in the same state. When one spouse lives in another state, it becomes even more so; and when children are involved, the complexities can increase exponentially. So how do you get divorced if you live in New Jersey and your spouse has moved out of state with the
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New Jersey Divorce Lawyer Expands on the Discovery Phase
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
05,Dec,16
New Jersey Divorce Lawyer Expands on the Discovery Phase
As a dedicated New Jersey Divorce Lawyer, I am often asked about the divorce discovery phase.  The discovery phase of a divorce process is exactly what it sounds like. It’s the way we discover each party’s assets – including bank accounts, credit card statements, tax returns, and any additional financial information – of which either
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Bergen County Divorce Lawyer Discusses College Expenses
DivorceNew Jersey Family Law Blog
Carrie S. Schultz, Esq.
24,Nov,16
Bergen County Divorce Lawyer Discusses College Expenses
As an experienced Bergen County Divorce Lawyer I am often asked how divorced spouses will pay for their children’s college expenses.  In New Jersey, the issue of whether or not a divorcing couple is obligated to pay for their children’s college cost is a very interesting issue. When you’re married, the state and the courts
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Attorney Carrie S. Schultz

Carrie S. Schultz, Esq. – author

Thank you for visiting our site. We realize that if you are reading this, you or someone you know is having marital or family difficulties. We truly understand how unsettling that can be for all involved. I personally want to invite you to explore the website which contains a lot of informational and educational items which I hope is of benefit to you. I also welcome you to contact us to schedule a consultation to discuss your matter in greater detail. Our firm philosophy is to always remain committed to providing our clients with the best service, care, guidance, communication, and legal advice possible for your particular situation. We take seriously you entrusting us with your legal matter. Happy researching! Attorney Bio

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Men’s & Fathers’ Rights Divorce Lawyers by Schultz & Associates, LLC

55 Hudson Street
Hackensack, NJ  07601

(201) 880-9770

(201) 880-9771

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