Divorces can be messy. There’s all the expense and paperwork, the dividing of property, and, if you have young children, the custody issue. After all that, you have to figure out how to file taxes.
We’re here for you. We know divorces can be rough, and while we may not be able to help with those other things, helping with taxes is what we at TaxGlobal do best. So here’s your personal guide to filing taxes after a divorce.
Filing status
When deciding how to file, here are some questions to ask:
- Was your divorce finalized before the end of the year?
- Do you have a child at home?
- Have you remarried?
If your divorce was finalized before the end of the current tax year, you can’t file a joint return. But if you’re providing a home for at least one child, you may be able to file as head of household, which might reduce your taxes owed. On the other hand, if you remarried by the end of the tax year, you’re 100% OK to file a joint return with your new spouse.
Filing as head of household
So how do you qualify to file as head of household?
- Be unmarried (or at least considered unmarried) on the last day of the tax year
- Pay more than half of the costs for your household for the tax year
- Have at least one qualifying person living in your house for over half the tax year, unless that person is a parent, in which case they don’t have to have lived with you
Your child qualifies even if you can’t claim an exemption for them, but if that child is married, they don’t qualify unless you can claim an exemption for them. Anyone else qualifies if you can claim the exemption for them.
In order to be considered unmarried, all of the following must be true:
- You’ve filed a separate return from your spouse or ex
- Your spouse or ex hasn’t have lived in your house at any time during the past six months of the current tax year
- You’ve paid over half of the costs of keeping up your home for the current tax year
- Your residence has been the main home of your child (or eligible step or foster child)
- You can claim an exemption for the child who lives with you, unless the noncustodial parent claims that exemption and you filed Form 8332
Alimony tax
If you make a payment to an ex-spouse as part of a divorce or separation contract, that’s known as alimony. And if that payment meets the following requirements, it counts as an alimony for tax purposes:
- The payment is made in cash
- The divorce agreement doesn’t specify that the payment isn’t alimony
- You and your ex don’t file a joint tax return
- The payment is not classified as child support
- You are not required to continue making the payment (either in cash or in property) after the death of your ex
- You and your ex don’t live in the same household when the payment is made (outside of a one-month buffer period), unless:
- You haven’t legally separated
- You’re making the payments under a written agreement of separation of a temporary support order
Alimony payments that occur after Dec 31, 2018 can’t be deducted from your taxes, but they also don’t count as taxable income if you’re the one receiving them. However, you’ll want to check your state’s specific alimony rules, as these can differ from those of the IRS.
Child support and dependent credits
Like alimony, child support isn’t tax deductible, nor is it counted as taxable income.
But what if you want to claim your children as dependents for tax purposes? Generally, you can do this if you’re the custodial parent, or the parent whom the child lives with for the most nights in the tax year.
But the noncustodial parent can claim the child as a dependent if they have the consent of the custodial parent. That means the custodial parent has to fill out Form 8332. The noncustodial parent also has to attach one of the following documents to their tax return if they want to claim the child tax credit:
- Form 8332
- Part of a divorce decree from before 2009 that details the child’s dependent status for taxes
Just because the noncustodial parent claims the child as a dependent doesn’t necessarily mean that the custodial parent can’t still claim credits like:
- EIC (Earned Income Credit)
- Child and dependent care credit
- Exclusion for childcare benefits
However, there’s no situation in which the noncustodial parent can claim the following:
- Head of household status
- EIC
- Child and dependent care credit
- Exclusion for dependent care assistance benefits
Health insurance
If you and your ex purchased health insurance from a federal or state marketplace, and you received an advance on the premium tax credit for that insurance, then you need to update the marketplace through which you bought the insurance of any changes to your family structure (such as divorce, marriage, adoption, or a new job).
IRAs and retirement plans
Look at your QDRO (qualified domestic relations order) to see how your divorce will affect your IRAs and employer-provided retirement plans. This document is a judgment, decree, or court order that details the benefits paid to your child, ex-spouse, or dependent.
You can learn more by reading IRS Publications 504 and 575.
Have more questions or need help filing a tax return after a divorce? Talk to one of our experienced CPAs.