How Does Divorce Affect My Taxes?

Who Pays for What Taxes During & After a Divorce?

If you are in the process of divorcing your spouse or have recently divorced, you may be wondering what impact this has on your tax situation. Dealing with your taxes the year you divorce and the year after can be significantly more complicated than what you are used to, especially if you now have to account for alimony or child support. If you are feeling overwhelmed, do not worry. You are not alone.

Below we answer a few frequently asked questions about the impact a divorce will have on your tax situation. We also provide tips on staying organized so that your next tax season is less stressful.

Taxes When Divorce Isn't Final

Divorce can be a long process. On average, most divorces are resolved in about six to nine months. However, it is not uncommon for the process to drag out for a year or more. With such a protracted time frame, you and your spouse will likely have to file your taxes while your divorce is in progress. So, who is responsible for your tax filing when your divorce isn't finalized?

If your divorce isn't final or you are only separated, you are still legally married; therefore, you and your spouse are still responsible for filing your taxes as a married couple. Even if you are not living in the same residence anymore, if you are still legally married, you will have to file as either married filing jointly (MFJ) or married filing separately (MFS).

There are different benefits associated with both MFJ and MFS filings. For example, if you are filing a joint return, you may still qualify for certain tax benefits. However, when filing jointly, this will also mean that you and your spouse will share liability for any taxes owed and any related debts or penalties associated with the filing. Meanwhile, if you are filing MFS, you may be able to take advantage of a head of household filing status. To determine the best filing option, you should consult a certified accountant or tax preparer.

Taxes After a Divorce is Finalized

After your divorce is finalized, you will no longer be able to file as a married couple. However, because when you file, you are doing so for the previous year, you may have one more year where you have to file an MFJ or MFS return. Consequently, when it comes to taxes, your first step after a divorce should be to spend some time determining what your filing status should be.

If your divorce was finalized by 11:59 pm on December 31 of the tax year you are filing for, you should file as a single taxpayer. Alternatively, if you are a custodial parent to minor children, you may qualify to file as head of household. However, if your divorce was finalized after midnight on December 31, you must file as MFJ or MFS.

Even if you were married for most of the year, your marital status as of December 31 determines your filing status.For example, if your divorce is finalized in February 2023, your filing status for the tax year 2022 will be either married filing jointly or married filing separately. Then, your filing status for the tax year 2023 will be single or head of household.

Who Can Claim Shared Children as a Dependent

Generally speaking, the custodial parent has the right to claim any shared minor children as dependents. The custodial parent is usually the parent the child lives with most of the time. In cases where parents share 50/50 custody, this can get murky. However, for tax purposes, the parent who has 183 overnights (compared to the other parent's 182) will be designated as the custodial parent.

It is not uncommon for parents to designate who gets to claim the child as a dependent as part of their custody agreement, especially in cases where the parents share joint custody. Another common method is for parents to trade off claiming the child. In these situations, the custodial parent will have to sign IRS Form 8332, Release/Revocation of Claim to Exemption for Child by Custodial Parent, and the noncustodial parent will have to attach this form to their return.

Who Is Responsible for Tax Debt?

When a couple has a tax debt or owes back taxes, it is usually divided during the property division stage of the divorce. However, what is important to remember is that when a couple owes a debt, whether to the IRS or other creditors, their divorce decree doesn't stop those creditors from going after both parties to collect the debt. Therefore, if you and your former spouse owe back taxes, and your ex is ordered to pay and doesn't, the IRS may come after you or any jointly owned property to settle the debt. If you are in a situation like this, it is recommended that you work with a certified public accountant, licensed tax preparer, or an attorney to ensure your best interests are protected.

If you are going through a divorce, reach out to the Law Office of Alexandra White, PC, for guidance. We can help you through the process. Our attorneys know how devastating divorce can be, and we work with an eye toward helping you move forward to a more positive future.