How Does Your Tax Situation Change after a Divorce?
Filing taxes can be complicated even for the most straightforward of situations. When you divorce, things can become exponentially more confusing. Do you still have to file a joint return? What are your tax obligations? How do you go about claiming dependents? Filing your taxes for the first time post-divorce can be incredibly intimidating.
Whether you’re considering filing, in the middle of the divorce process, or have just finalized your divorce, you probably have a lot of questions. Below we tackle some frequently asked questions about how divorce can affect income tax filings. Keep reading to learn more.
When Does my Filing Status Officially Change?
If you got divorced mid-year, you are probably wondering how you manage your taxes. Do you file jointly with your former spouse, or do you file as single? As far as the IRS is concerned, if your divorce is finalized by December 31st, they will consider you unmarried for that entire calendar year. So, if your divorce was finalized on June 6th, 2020, the IRS will consider you unmarried for 2020. Similarly, if your divorce is finalized on December 31st, they will also consider you unmarried for 2020.
It is important to pay attention to the date that your divorce was finalized and not the date you initially filed. If your divorce were finalized on January 15th, 2020, you would have to file as married when filing your 2019 taxes, even if your divorce was initiated in 2019.
What Is My Post-Divorce Filing Status?
When you are married, you generally have two options when filing your taxes. You either select “married filing jointly” or “married filing separately.” Once your divorce is finalized and you have determined that the IRS will consider you unmarried for that filing year, you will have to select either “single” or “head of household.”
Do I Qualify for a Head of Household Filing?
If you plan to file for head of household, it is important to check to make sure that you meet the eligibility requirements. According to the IRS, you can file as head of household if you meet all the following criteria:
- You are married or considered unmarried by December 31st of the year for which you are filing
- You paid over 50% of the costs associated with keeping up a home for the year
- A qualifying dependent lived with you in the home for over half the year
To be considered unmarried by the IRS for head of household filing status, you must meet the following requirements:
- You file a separate return from your former spouse
- You paid more than 50% of the cost of keeping up your home during the tax year
- Your former spouse didn’t live in your home for the last six months of the tax year
- Your home was the primary residence for your children, stepchildren, or foster children for more than 50% of the year
- You can claim the child as a dependent
It’s important to note that if you and your former spouse share a minor child, both of you cannot use the child as your qualifying dependent when filing as head of household. The parent who has custody of the child the majority of the time can use the child as their qualifying dependent. If you and your child’s other parent share 50/50 custody, the parent with the higher adjusted gross income can claim the child.
Note: using a dependent child to qualify for a head of household filing status is not the same as claiming the child as a dependent on your taxes. Keep reading to learn who gets to claim dependent children after a divorce.
Who Gets to Claim Dependent Children?
When a child’s parents are divorced and living separately, only one parent can claim the child as a dependent. Generally speaking, the custodial parent is the one who can claim the child as a dependent. However, the non-custodial parent may claim the child as a dependent as long as the custodial parent signs a written declaration citing that they will not be claiming the child as a dependent for that year. This letter then must be attached to the non-custodial parent’s return.
Do I Have to Pay Taxes on Child or Spousal Support?
According to the IRS, child support is neither taxable nor deductible. This means that the individual required to pay child support cannot deduct the payments from their taxes, and the person receiving the child support does not have to include them as taxable income.
While you are not required to report child support, you may be required to report alimony or spousal support, depending on when your divorce was finalized. If you were divorced on or before December 31st, 2018, spousal support payments are both deductible and taxable. However, if you were divorced after December 31st, 2018, you cannot deduct spousal support as the payor, nor do you have to report it as taxable income as the receiver.
Filing your taxes post-divorce can be very complicated. If this is your first time filling after your divorce, and you can afford it, it may be worth working with a tax preparer or a certified public accountant (CPA). They can help ensure that you are filing your taxes accurately and help you avoid an audit.