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How Does Legal Separation Affect Income Tax Status?

September 1, 2021 By Steven B. Menack

How Does Legal Separation Affect Income Tax Status? | Steven B. Menack NJ Divorce & Separation Mediation Services

What is Legal Separation?

Legal separation is an alternative to divorce which allows a couple to separate while still remaining legally married. This is a preferable option for couples who do not see divorce as an option for moral, religious, or financial reasons, or couples that believe they can still reconcile. Legal separation is easily reversible, so it is not as permanent as a divorce, but it still gives the couple a chance to decide on major issues such as division of assets and child custody while deciding if divorce is right for them. Couples seeking a legal separation in New Jersey can participate in separation mediation to agree to the terms of separation just as they would for a divorce.

How Does Legal Separation Affect Income Tax Status?

It is always advisable to consult with your accountant or financial advisor to ensure that you are filing appropriately during your period of separation. You and your spouse should discuss how you will be filing your taxes each year to ensure consistency.

If you are separated, you are still legally married. While you may think you should file separately, your filing status should be either:

  • Married filing jointly (MFJ)
  • Married filing separately (MFS)

If you’re married filing separately, you’ll probably lose some tax benefits. Many tax benefits are available only if married couples use the married filing jointly filing status.

Why Would You Get a Legal Separation Instead of a Divorce?

The key difference between divorce and legal separation is that in a divorce the marriage has ended, while in a separation you are still legally considered married. This has several benefits that divorce cannot offer such as:

  • Avoiding the Stress of Divorce – Divorce can be a very taxing process that can drag out for a long time. Legal separation can be a much more moderate affair with less stress and time commitment.
  • Religious Reasons – One or both of the parties involved may object to divorce on religious or moral grounds.
  • Tax Benefits – Both you and your spouse can still take advantage of marital tax benefits.
  • Healthcare and Insurance Benefits – One spouse can remain eligible for the healthcare and insurance benefits of the other. However, sometimes there are clauses that disallow legally separated couples from gaining these benefits, so make sure to check your policy.
  • Government Benefits – If one spouse will soon become eligible for their spouse’s government benefits or Social Security, it can be wise to pursue legal separation rather than divorce.
  • Leaving the Door Open to Reconciliation – If you feel your situation may improve with some time apart and that future reconciliation is an option you want to keep on the table, legal separation allows that.
  • Less Costly – Divorce can get expensive. A legal separation is generally a much cheaper option.

Filed Under: Legal Separation

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Steven B. Menack Esq., APM

Steven B. Menack, Esq.

  • stevenmenack@divorcelawandmediation.com
  • 1-800-669-4694

The impartial third party, or divorce mediator, interacts closely with both parties to work out a legally binding agreement based on both parties’ needs and desires.

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