Tips On Filing Your Taxes After A Divorce

By Ashley Henshaw. May 7th 2016

Finances are one of the matters you’ll inevitably have to deal with if you’re going through a divorce. Even if your divorce occurs far away from tax season, it’s something you need to start thinking about as soon as you enter divorce proceedings. Here are some tips for filing your taxes after a divorce.

Filing Status

The most basic thing you’ll need to determine when dealing with taxes after a divorce is what your filing status will be. If you’re in the midst of a divorce which has not yet been finalized, you have two main options. You can still file a joint return, or you can file as married but filing separately. The latter option is more sensible for many individuals going through divorce, particularly for those who decided to begin living apart at some point during the tax year.

There’s one exception to this rule, and that’s filing as “head of household” rather than single or married. If you’re in the midst of a divorce, you may qualify for this filing status if you and your spouse lived separately for the last six months of the tax year and you paid more than half the cost of the upkeep of your main residence. You must also have to be able to claim your child as your dependent, if applicable. This option requires separate tax returns from your spouse even though you’re still legally married. Ask a tax professional if you are considering filing under this status on your tax return. (For more information about tax filing statuses, see Determining Your IRS Filing Status On Your Federal Income Tax Return.)

One thing that’s important to consider is that if you become officially divorced at any point during the year (even on the last day of the tax year), you’re considered unmarried for the whole year. For some couples about to be divorced, it may make more sense to wait until after the first of the year to finalize the divorce in order to maximize the benefits on a tax return.

Children/Dependents

Claiming children as dependents on a tax return may change after a divorce for some. This will depend on whether you are considered to be the custodial or noncustodial parent. The custodial parent can claim the children as dependents on their tax return. The noncustodial parent cannot. In most cases, the custodial parent is the parent whom the child lives with for a greater number of nights over the course of the year. In some cases, one parent is designated as the custodial parent by court order.

However, there may be an exception for those parents who share custody in equal parts. Some couples agree to take turns claiming the children from year to year. In cases where parents have two children, another option would be for each parent to claim one of the children. Speak with a tax professional before you decide to go this route. (To learn more about selecting a tax professional, see How To Select The Best Income Tax Preparer.)

Child Support

If you’re recently divorced, then it may be your first time dealing with child support on your taxes. If you’re the payer, be aware that child support is not deductible. For payees, child support received is not considered to be income. Therefore, while child support may affect your finances substantially, it is considered a tax-neutral event.

Alimony

Unlike child support, alimony payments are considered taxable income for the recipient. If you’re the payer, you can take a tax deduction for alimony payments on your tax return. Keep in mind that you do not have to itemize alimony payments to get the tax benefit. However, it is important to note that alimony payments are not tax deductible if you continue to live together after the divorce or if the payments do not follow the stipulations of a written divorce agreement.

Assets

There’s good news and bad news in this category. The good news is that assets that are transferred (by court order for example) during a divorce are not taxable. The bad news is that one of your biggest assets – your home – may be an exception to the rule. As a married couple, you wouldn’t have to pay taxes on up to $500,000 in profit on the sale of your primary residence. However, that number is lowered to $250,000 once you’re single so selling the house before the divorce might make sense for some couples.

Name Changes

It may seem like a small matter compared to the ones listed above, but don’t forget that your official name with the Social Security Administration must match the name on your tax return. Even if you’ve started going by your maiden name again, you must have made the change official in order to use that name on your tax return. Fortunately, an official name change isn’t too difficult. Just stop by a local Social Security Administration office or go to their website to get the form. The change can usually be verified in about two weeks.

Divorce can be a very difficult process, but planning ahead for things like your tax return will make the proceedings and the aftermath a little easier. If it’s your first time filing taxes after a divorce or while separated, you may want to talk to a tax professional to make sure you’re aware of the ways in which filing your taxes will change as a result.

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