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4 Tips for Navigating Tax Season After a Divorce

Filing taxes after a divorce can be tricky. Learn some tips that will help you prepare for and navigate the upcoming tax season more confidently.

Divorce changes almost everything in your life, and you might be wondering about its implications during the fast-approaching tax season. If this is your first year filing singly after years of joint returns, the process might feel overwhelming or confusing. We’re here to support with four tips that will help you navigate tax season after a divorce.

Determine Your Correct Filing Status

Your marital status on December 31 determines your filing status for the entire year. Even if you were married for most of the year, the IRS considers you unmarried for tax purposes if your divorce was final by New Year’s Eve.

Therefore, you generally have two options: Single or Head of Household. Filing as Head of Household is more financially advantageous, but you must meet these criteria:

  • You must have covered more than half the cost of maintaining your home.
  • You must not have lived with your spouse for the last six months of the year.
  • Your home must have been the main home for your child for more than half the year.
  • You must be able to claim the child as a dependent.

Decide Who Claims the Children

Claiming dependents can be a source of contention between ex-spouses. Generally, the custodial parent claims the child as a dependent. However, the non-custodial parent might be able to claim the child if the custodial parent signs a release form (Form 8332).

It’s very important to communicate with your ex-spouse early to avoid both of you claiming the same child, which can trigger an audit.

Understand Alimony and Child Support Rules

The tax treatment of alimony changed drastically with the Tax Cuts and Jobs Act of 2017. For any divorce finalized after December 31, 2018, the payer cannot deduct alimony payments, and the recipient does not report them as income. The exact same is true for child support payments. Understanding the tax implications of spousal support and child support is crucial so you don’t accidentally underreport income or claim invalid deductions.

Update Your Withholding

Your change in marital status will likely impact your tax liability. Consequently, your paycheck withholdings might need an adjustment. If you don’t update your W-4 form with your employer, you might have too little tax withheld, resulting in a surprise bill, or too much withheld, giving the government an interest-free loan.

Use the IRS Tax Withholding Estimator to figure out the right amount. You’ll need your most recent pay stubs, your most recent tax return, details on other income sources, and information on any deductions or credits you plan to claim.

Conclusion

Taking the time to understand your new financial landscape will pay off. Following these tips for navigating tax season after a divorce will help you close the book on the previous year and start fresh.

 

Talk About It:
    1. Have you and your ex-spouse handled the conversation about who claims the children as dependents?
    2. Do you have alimony or child support payments, and have you considered how they impact your financial plans?
    3. What was the most surprising financial change you noticed during your first year filing as a single person?
    4. Have you adjusted your withholdings since your divorce, and if so, did it make a noticeable difference in your take-home pay?
    5. What resources or professionals did you find most helpful when preparing for your first post-divorce tax return?

 

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