Filing Taxes After Divorce: What You Need to Know

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When you’re going through a divorce, taxes may be the last thing on your mind. But divorce can have a significant impact on your taxes—including your filing status, name changes, qualifying credits and deductions, and social security benefits—and your overall financial future. 

If you’re filing taxes after divorce this year, keep the following tips and considerations in mind.

Updating Your Form W-4

Because your financial and tax situation changes dramatically after divorce, it’s important to update your tax withholdings. Failing to adjust your tax withholding might leave you with an unexpectedly large tax liability at the end of the year. 

The IRS requires individuals to submit a new W-4 to their employer within 10 days following divorce or separation.  

Determining Your Filing Status

Your filing status is based on your marital status on December 31 of the tax year. If your divorce is finalized by then, you cannot file a joint return. However, if your divorce is not finalized until the new year, the IRS will recognize you as married for tax purposes. You will then have to decide if you want to file jointly or separately. 

 

Married filing jointly vs. Married filing separately

Filing jointly can result in a bigger tax break for you both, as you can get a bigger standard deduction from your combined incomes. 

The standard deduction for tax year 2022 is $25,900 for married couples filing jointly, $12,950 for single taxpayers and married individuals filing separately, and $19,400 for heads of households.

However, filing jointly also means each spouse is responsible for the tax payments (and any penalties). So, if one spouse earns significantly more than the other, that could put a greater burden and financial risk on the lower-earning spouse. In such cases, it may be better to choose “married, filing separately.” This means each spouse files their own returns and is responsible for the associated taxes individually.

 

Head of household

When filing taxes after divorce, you may be able to file as head of household. Head of household status provides a better tax break than filing as single. 

To file as head of household, you must meet the following criteria: 

• A qualifying dependent lived with you in your home for at least 6 months of the year.
• You were divorced (and therefore considered “unmarried”) by December 31.
• You paid for more than half of the home’s maintenance costs for at least half the year. (This can include repairs, utilities, home insurance, etc.)

Keep in mind that if you are sharing custody with your spouse, only one of you can file as head of household.

Sorting Who Can Claim Dependents

A dependent can only be claimed by one person. So if you have children, you’ll need to determine who can or will claim them as dependents after the divorce. This will impact both your filing status as well as the specific tax credits you qualify for.

Typically, the custodial parent (i.e., the parent the child lives with for the majority of the year) is entitled to claim the child(ren) as a dependent. The custodial parent will then potentially qualify for several associated tax credits, such as the Child Tax Credit. 

Pro Tip: The non-custodial parent may be able to claim a child as a dependent (and get qualifying tax credits) if the custodial parent signs permission through IRS Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. The custodial parent will then no longer be allowed to claim the child as a dependent or receive associated tax credits. 

Claiming Tax Credits

There are multiple tax credits available to parents and guardians with dependents. To qualify as a dependent for the 2022 tax year, your dependent generally must:

• Be under age 17 at the end of the year
• Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece or nephew)
• Provide no more than half of their own financial support during the year
• Have lived with you for more than half the year
• Be a U.S. citizen, U.S. national or U.S. resident alien

Child Tax Credit

The Child Tax Credit is worth up to $2,000 per qualifying dependent if your modified adjusted gross income is $200,000 or below (or $400,000 if you’re married filing jointly).

If you qualify for the Child Tax Credit, you may also qualify for these tax credits:

• Child and Dependent Care Credit
• Earned Income Tax Credit
• Adoption Credit and Adoption Assistance Programs
• Education credits

Because there are so many valuable tax credits available for taxpayers with dependents, this is a big consideration when filing taxes after divorce. 

Child Support and Alimony Payments

Before 2018, both child support and alimony payments used to be tax deductible for the payee and considered taxable income for the recipient. (If your divorce was finalized prior to 2018, that may still apply to your alimony payments). 

However, following legislation in 2017, child support payments are no longer tax deductible by the payer or taxable for the recipient for any divorce settled after December 31, 2018. 

Divorced Spouse Social Security Benefits

According to the Social Security Administration (SSA), if you are divorced, your ex-spouse can receive benefits based on your record (even if you have remarried) if:

• Your marriage lasted 10 years or longer.
• Your ex-spouse is unmarried.
• Your ex-spouse is age 62 or older.
• The benefit that your ex-spouse is entitled to receive based on their own work is less than the benefit they would receive based on your work.
• You are entitled to Social Security retirement or disability benefits.

This also applies in reverse—you may be entitled to collect divorced spouse social security benefits under the same conditions. Your ex-spouse does not have to be collecting their benefits yet for you to claim divorced spouse benefits, as long as the divorce is at least two years old. Any benefits you receive will not affect the social security benefits paid to your ex. 

Pro Tip: Social security benefits may be taxable, so keep this in mind when you file taxes after divorce.  

Navigating taxes after divorce can be daunting. But ezTaxReturn will work with you every step of the way to make it as quick and painless as possible—and get you the biggest return.

Get started today.