Divorce is an emotionally challenging experience, and as tax season rolls around, it brings a new layer of complexity to an already difficult time. If you're recently divorced or in the process of divorce, understanding how your filing status impacts your taxes is crucial.
Understanding Filing Status and Why It Matters
The IRS requires everyone to indicate their tax filing status when submitting a return. If you're divorced or your divorce process is ongoing, selecting the right filing status can feel complicated. Your filing status determines your tax rates, available deductions, and even the credits you may qualify for. The five filing statuses include:
- Single
- Married Filing Jointly
- Married Filing Separately
- Head of Household
- Qualifying Widow(er) with a Dependent Child
For couples navigating a divorce, “Single,” “Married Filing Jointly,” “Married Filing Separately,” or “Head of Household” typically come into play. Which status applies to you depends largely on your marital status by the last day of the tax year.
Are You Legally Divorced by December 31?
The IRS uses your marital status as of December 31 to determine your filing status for the entire tax year. If your divorce was finalized by the end of the calendar year, you cannot file as "Married," even if you spent most of the year still in the marital relationship. Instead, you’ll likely file as “Single” or, in certain cases, “Head of Household.”
If your divorce has not been finalized, however, you remain legally married in the eyes of the IRS. This means you and your spouse must choose between "Married Filing Jointly" or "Married Filing Separately."
Married Filing Jointly vs. Married Filing Separately
Filing jointly may offer more benefits, such as a higher standard deduction and access to certain tax credits. However, it also means you share responsibility for any tax liabilities, errors, or discrepancies. If you're experiencing a contentious divorce, filing separately might feel like the safer option. Keep in mind though that filing separately often results in higher individual tax burdens and may disqualify you from certain deductions or credits.
Claiming “Head of Household” Status
"Head of Household" filing status can be highly advantageous due to lower tax rates and a larger standard deduction. However, qualifying is not automatic. To file as Head of Household, you must meet the following criteria:
- Be considered “unmarried” on the last day of the tax year (including legal separation).
- Pay more than half the cost of maintaining your home for the year.
- Have a dependent, such as a child, who lived with you for at least half the year.
Tax Implications of Alimony and Child Support
Divorce settlements often include financial arrangements like alimony or child support, and both have distinct tax implications. Understanding how these payments impact your taxes can make a significant difference when filing:
- Alimony: For divorces finalized before December 31, 2018, alimony payments are deductible for the payer and taxable income for the recipient. However, for divorces finalized after that date, alimony is neither deductible nor taxable.
- Child Support: Payments labeled as child support are not taxable income for the recipient, nor are they deductible for the payer.
Consult with a Douglas County Divorce Attorney Today
Tax laws can be complex, especially when combined with the challenges of divorce. Working with a seasoned divorce attorney in Douglas County provides peace of mind that no financial or legal detail will slip through the cracks.
Moreno Family Law, LLC understands the stress of navigating life post-divorce. Our compassionate and experienced team is here to guide you through every step with the utmost care.
Contact us at (303) 590-3690 today to schedule a consultation and get the personalized guidance you deserve.