Filing Taxes During a Divorce

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If you’re filing taxes before or during a divorce, there are several filing options you should be aware of as well as potential risks.

When are you divorced for taxes?

Whether you’re divorced or married for taxes goes by your status on the last day of the year.

If you’re legally divorced on December 31st, you’re divorced. Legally divorced means that your divorce is final under your state law.

If you’re still married on December 31st, you’re married even if you finish your divorce before you file.

What tax filing status do you use during a divorce?

Once your divorce is over, you go back to filing as single. You may also qualify to file as head of household if you’re a parent who can claim one or more of your children as a dependent.

If you’re not divorced by the end of the year, you usually have to keep filing as married. You may qualify to file for head of household if:

  • Your spouse didn’t live in your home for the last six months of the year
  • You paid more than half the cost of keeping up your home for the year
  • Your dependent child lived with you for more than half of the year

Otherwise, the IRS typically doesn’t recognize legal separations.

Should you file jointly or separately during a divorce?

If things are mostly amicable, you’ll usually want to choose whichever filing status saves you the most in taxes. Include who pays any taxes owed or who gets any refund in your divorce agreement.

One thing to note is that if you file jointly, both spouses are usually responsible for the entire amount owed on the tax return as well as any additional taxes or penalties if the IRS determines the other spouse made a mistake.

  • You may want to file separately if your spouse has complex taxes that make it difficult for you to understand if they’re accurate.
  • You may want to file separately if your spouse’s tax situation will create a large amount due that won’t be paid at the time you file.

Talk to your divorce attorney or tax accountant before you file if you have anything other than a simple tax return with a small refund or amount owed.

Can your spouse make you file jointly?

Your spouse can never force you to file jointly. Both spouses must agree to file jointly and sign the tax return.

If you disagree over filing jointly, perhaps because it only helps one spouse, it’s something you can negotiate.

Who gets to claim the kids when you’re no longer filing as married?

By default, the parent that has the kids living with him or her for more than half of the year and pays more than half of their support can claim the children as dependents.

Even if you have 50/50 custody, one parent almost always had the kids for one extra night.

In most situations, the parents have the option to agree who will claim each child as a dependent. Common arrangements include:

  • Alternating years
  • Dividing up the kids
  • Figuring out who will save more

Your agreement should be included in your divorce agreement. If your spouse ever tries to go back on the agreement, the IRS will apply the default rules unless you provide a copy of the agreement.

What happens if you sell your house?

When you sell your primary residence, you can exclude up to $250,000 in capital gains as a single filer or $500,000 as a joint filer.

If you sell your house while you’re still married according to your tax return, you still qualify as a joint filer.

Normally, to qualify for this home sale exclusion, you have to have lived in the home as your main home for at least two out of the last five years.

If you’re not able to sell your house until after your divorce but both spouses still own it, both can usually qualify for the $250,000 individual exclusion as long as one of them continued to meet the two out of five years requirement.

Of course, if the house goes to one spouse in a divorce and that spouse later sells it, that spouse is responsible for all of the taxes and only has his or her own $250,000 exclusion.

Can you deduct alimony?

Alimony payments are no longer deductible. Some old divorce agreements are grandfathered in and those payments are deductible.

Can you deduct child support?

You generally can’t deduct child support.

Child support also doesn’t usually count towards making a child your dependent if they didn’t live with you for more than half of the year. Typically, the only way to get around this is if your divorce agreement allows you to claim the child as a dependent.

Can you deduct divorce costs?

The legal costs of a divorce are generally not tax-deductible.

Who has to pay the property taxes?

Property taxes are typically billed to the owner of record as of January 1st or some other date set by your state’s law. Unpaid property taxes can result in a lien on the home even if you agreed that the spouse that moved out would pay the taxes.

Don’t forget to include property taxes in your divorce agreement and check to make sure the payment cleared.

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