If you’re getting a divorce, the tax implications probably are not the most pressing issue on your mind. The specifics of filing taxes after divorce and how you draw up your divorce agreement could make a big difference when it comes to your tax refund. Many couples consult a financial advisor to help them divide assets and plan for a financial future after divorce. As you prepare for your divorce needs, here are some important things to think about so you can stay on top of your taxes.
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The filing statuses that you can use will depend on when your divorce is completed. If you complete your divorce on or before Dec. 31 (the final day of the tax year) then you cannot file a joint tax return. If the new year starts before your divorce becomes official, the IRS will still recognize you as married, and therefore allow you to file a joint return for the previous year. You’re also eligible to file a joint return, but if you do not want to you can choose the married filing separately status.
If you’re still legally married, filing a joint tax return may be your best option because you can get a higher standard deduction by combining your income with your spouse. The standard deduction is the amount of income that you can use to lower your tax bill.
For tax year 2024, the standard deduction is $29,200 for married couples filing jointly, $14,600 for single filers and married couples filing separately, and $21,900 for heads of households.
For tax year 2023, the standard deduction is $27,700 for married couples filing jointly, $13,850 for single taxpayers and married individuals filing separately and $20,800 for heads of households.
For those who cannot file a joint return, you may still be able to save some money by filing as a head of household. Keep in mind that filing taxes after divorce gets complicated. So remember that if you and your ex-spouse are sharing custody of a child, only one of you can file as head of household (more on that later).
When filing taxes after divorce, you can only use the head of household status if you meet all three of the following requirements:
If you and your spouse are employed, you will each fill out a W-4. This form tells your employer how much to withhold from your paycheck. Joint filers need to split their W-4 withholding between both spouses, so if you divorce, you may need to recalculate or adjust your allowances. Here’s a complete guide to filling out your W-4.
Alimony payments from divorce or separation agreements that were finalized before Jan. 1 are still considered an above-the-line deduction when filing taxes. But even if your divorce happened before that date, you should confirm with your tax expert to see if you can still deduct alimony payments when calculating your adjusted gross income.
On the flip side, all alimony payments received from finalized divorces before Jan 1, qualify as income (unless your agreement defines it differently). As the receiving spouse, you will need to report them as such on your Form 1040. Note that if you receive or make alimony payments, you cannot use forms 1040A or 1040EZ.
Child support payments work the opposite way of alimony payments. You cannot deduct any child support payments that you make. If you receive child support, you do not have to report it as income on your tax return.
If you have children, it’s important to understand who can claim them as dependents. This will affect tax credits that you can claim as well as your filing status.
The parent who can claim a child as a dependent is the custodial parent. The custodial parent is the one whom the child lives with for more nights during the tax year. A divorce agreement will often name the custodial parent.
If you are the custodial parent, you are eligible to claim the child as a dependent. That means you have the potential to claim the earned income tax credit (EITC), as well as the child and dependent care credit. When filing taxes after divorce, you may also be eligible to file taxes using the head of household status. As mentioned above, this will affect your income tax brackets when filing taxes after divorce.
If you are not the custodial parent, you are the noncustodial parent for tax purposes. You cannot claim the EITC or the child and dependent care credit. You also cannot file your taxes as a head of household. However, you may be able to claim some credits.
The noncustodial parent can claim a child as a dependent if the custodial parent signs Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. In that case, the noncustodial parent is eligible to claim the Child Tax Credit and the Additional Child Tax Credit.
To Use Form 8332, the custodial parent will need to sign it and the noncustodial parent will need to attach it to his or her tax return. Complete one copy of Form 8332 for each child.
Note that if you are the custodial parent and you sign Form 8332, you can no longer claim the child as your dependent, and you cannot revoke it until the following tax year. You should also keep in mind that the Trump tax plan eliminated exemptions for dependents in favor of a higher standard deduction.
In general, you cannot deduct legal expenses from filing a divorce. For example, you cannot deduct fees for counseling, litigation or tax advice that you got during your divorce.
The 2017 Trump tax plan also eliminated the deduction of legal expenses that were associated with generating income (e.g. seeking to receive property or alimony payments). Before the tax code changes, those legal fees qualified as a miscellaneous itemized deduction.
It is worth noting that for taxpayers filing now, the IRS said that “if you have no legal responsibility arising from the divorce settlement or decree to pay your spouse’s legal fees, your payments are gifts and may be subject to the gift tax.”
For any questions about divorce legal fees, it is best to talk to a tax expert. This will help to ensure that you handle everything properly.
If you’re going through a divorce, it’s important to make sure you understand how it will impact your taxes. For starters, review your filing status. You will not be able to file a joint return if your divorce goes through on or before Dec. 31. If your divorce wasn’t complete until the start of the new year, it’s still possible to file jointly.
Alimony can still factor into your AGI, but child support will not. If you have any specific tax questions about your divorce, it’s best to work with a tax professional.
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Derek Silva, CEPF®Derek Silva is determined to make personal finance accessible to everyone. He writes on a variety of personal finance topics for SmartAsset, serving as a retirement and credit card expert. Derek is a Certified Educator in Personal Finance® (CEPF®). He has a degree from the University of Massachusetts Amherst and has spent time as an English language teacher in the Portuguese autonomous region of the Azores. The message Derek hopes people take away from his writing is, “Don’t forget that money is just a tool to help you reach your goals and live the lifestyle you want.”
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