Divorce negotiations are exhausting. With months of back and forth discussions, court dates and rehashed arguments, most spouses could use a break from thinking about their ended marriage. This desire for a break can make it challenging for spouses to remember one final process: taxes.
Recently divorced couples must make filing changes to their taxes to reflect their change in relationship status. Individuals must account for changes to property ownership, living arrangements, dependents, and more.
Important tax changes to note
Depending on when a couple finalizes their divorce, they must make the relevant changes to their taxes. Co-parents will experience the most significant changes:
- Status: If the couple finalizes their divorce by the end of the calendar year, each spouse must change their filing status from “married” to “single” or “head of household.” Couples with legal separation agreements or those living apart for at least six months should also change their status. If a couple’s divorce did not finish by the end of the year, spouses can file as “married filing separately” but can still file as “married” to receive better deductions.
- Dependents: Couples with children will have worked out legal custody during the divorce negotiations, so know what to expect when claiming dependents. Higher-earning parents can receive a larger tax break when claiming dependents. Non-custodial parents can claim a child’s medical expenses they paid for as well.
- Alimony/child support: Taxes must also account for payments between spouses. The parent paying alimony can deduct those payments from their taxes, while the recipient must list alimony received as taxable income. Child support payments are neither deductible nor taxable.
- Property division: Before finalizing the divorce, married couples can freely transfer property between them. These transfers allow couples to consolidate high-value property like the house or cars while avoiding sales tax. On taxes, spouses must make sure they record any sales, donations or profit splits.
An attorney can consult
Recently divorced couples can bring questions about tax filing to a local lawyer familiar with divorce. An attorney can provide context, look over divorce resolutions and help settle any tax disputes.