Filing Your Taxes After Divorce

Chris Bibey
by Chris Bibey

Did you recently go through a divorce? In this case, you probably have some big questions on your mind, including: how do I file my taxes now that I am no longer married? It is important that you learn how to manage your taxes post-divorce. The more advice and information you obtain, the better chance you have of avoiding costly tax mistakes.

Filing Status

The first step in filing your taxes after divorce is determining your filing status. If you are considered legally divorced as of the last day of the calendar year, you must file as “single” or “head of household.” You may also claim one of these statuses if you are not divorced but you have a legally binding separation agreement, or if you and your spouse have lived apart for (at least) the last 6 months of the tax year.

If you are still legally married as of December 31st and were still living together, you must use the status of “married filing jointly” or “married filing separately.” If the spouses do not trust each other, it is recommended that they file separately. (Additional advice: filing separately can limit potential tax benefits.) But if they decide to file jointly, they must understand that they are both responsible for the information on the return.

Depending on your specific situation, certain filing statuses may be more beneficial to you. As a bit of tax advice, “head of household” and “married joint” filers generally have lower taxes than “single” and “married separate” filers. So even if you are going through a divorce, you may try to file a joint return to save money and take advantage of this advice while you can.

Dependent Exemptions and Child Custody

The IRS generally assumes that the parent with primary custody will claim the exemption for dependent children on their tax return. However, a divorced couple with 2 or more children may decide to divide the exemptions between them. The parent with the higher income typically gets a larger tax break from claiming dependent exemptions ― therefore, the couple may decide to allow that parent to claim the children. Even if you don’t have custody of your child, you still have the right to deduct their medical expenses if you paid for them. Many divorced parents forget to take advantage of this advice.

Alimony and Child Support Payments

Child support payments are not deductible to the parent paying them; however, alimony is considered an above-the-line deduction for the payer. Alimony payments are also considered “taxable earned income” to the parent receiving them.

The parent who makes the child support payments is often the higher earner. They may, in fact, remit the money in the form of alimony in order to save on taxes. While the IRS does allow this, any alimony that resembles child support may not be fully deductible. It is important to understand the rules regarding divorce-related tax deductions before using this advice.

Tax Refunds

Are you expecting a tax refund? This is a factor that can further complicate your situation if you filed a joint tax return and your divorce is pending. Once you know the amount of the refund, you should communicate with your ex-spouse to decide how it will be divided. Some advice suggests that one spouse retain the entire refund and give assets to the other spouse in exchange. These are the types of issues that you will need to address. If things get confusing or overwhelming, you can always hire a professional to provide tax and/or divorce advice.

Since there are many details to consider, you have to be careful when filing your taxes for the first time after a divorce. A divorce is never easy, and you don’t want to make things more difficult by approaching your taxes from the wrong angle. If you need any extra advice, hire a qualified professional who can guide you through the filing process.