divorce_taxesNow that you’re separated or divorced, you likely have questions about your taxes.

Who will claim the kids when tax season comes around? How will this affect my retirement? These are good questions to ponder.

If you are separated from your spouse, you should know that the IRS takes many things into consideration when it comes to filing your taxes. If you are separated, you are still considered married for tax purposes. There is one exception – if you paid for upkeep of your home for more than 6 months and supported a dependent child, you may file as head of household.

Your tax preparer can walk you through the difference between filing separate or joint returns to determine which will yield a bigger tax refund. Typically, filing jointly will lower your tax liability and increase the number of deductions and credits for which you are eligible. Keep in mind that when filing a joint return, both parties assume responsibility for all taxes that may be owed to the IRS.  

If you are in the process of getting a divorce, you are still considered married according to IRS standards. Therefore, you will need to file taxes as you would if you were separated.

If your divorce decree is final by Dec. 31 of the tax year, your filing status changes, along with certain credits and deductions that you were eligible for while married. You will have to file your taxes using the “single” filing status, or as “head of household” if you are taking care of a dependent.

The following will apply once your divorce is final. 

  • The medical expense deduction can be taken for all costs you incurred for your child’s medical bills and the cost of your child’s daycare, even if your ex-spouse claims the child as a dependent.
  • The child credit and American Opportunity higher education credit can be claimed only if you are claiming the child as a dependent.
  • Alimony payments outlined in your divorce agreement may qualify for a deduction.
  • Proceeds from the sale of an asset you acquired as a result of the divorce can be taxed. An example would include the sale of a home.
  • An early withdrawal from a 401k for divorce purposes can have tax consequences.

Publication 504, Divorced or Separated Individuals, has more information and addresses taxpayer concerns about divorce and its effect on taxes. If you plan to change your name, it is also important to legally make the change with the Social Security Administration to avoid any delays in filing your taxes. Tips on how to start the name change process can be found on the IRS website.

You can also visit your nearest Liberty Tax® preparer for assistance in filing your taxes during or after a divorce.

Disclaimer: Tax Lounge is an informational source for industry news and related topics. We take every effort to provide honest and accurate tax information, but this information should not be a substitute for professional tax advice. Use our office locator to find your local tax office or click here to subscribe to our free newsletter. Follow Liberty Tax® on Facebook and Twitter