How Divorce Affects Your Income Tax Filing Status

The year after you divorce is filled with a number of “firsts” to navigate: figuring out a parenting time schedule, establishing new holiday traditions, planning family vacations with a family that doesn’t look like it once did. Then there’s another “first,” perhaps more dreaded than all the rest: the first time filing your income tax return without your former spouse. (Let’s be honest; you probably didn’t enjoy filing your income tax return even with your former spouse.)

Not only does divorce mean you have to figure out your tax return on your own, but it means that there are new details to figure out. Let’s dive in and take a look at some of the ways divorce affects your income tax filing status, and the benefits of various statuses.

The Timing of Your Divorce

One of the first boxes to check on your tax return is the one for filing status. It seems like a pretty straightforward question, but it may not be as simple as you think. You may be single now, but filing as such may not be your only option—or your best one.

When your divorce became final matters for your tax filing status. If you were still married as of December 31, 2019, you can still file your taxes as married for tax year 2019. Then the question becomes, do you want to file one last joint tax return, or take advantage of the “Married, Filing Separately” status? Here are some reasons you might want to choose “Married, Filing Separately:”

• You and your ex-spouse don’t want to, or can’t, cooperate to file your return;
• You have income-based student loan repayment and filing separately means that your repayment amount will be based only on your income, not your now ex-spouse’s (but you may sacrifice certain education tax credits or the ability to deduct student loan interest);
• To avoid liability for your ex-spouse’s tax debt;
• To protect your own refund from garnishment for your ex-spouse’s unpaid child support, taxes, or certain other debt;
• To take advantage of being in a lower tax bracket, if your now ex-spouse earned much more money than you.

If your divorce was final before December 31, 2019, filing as a married couple, whether jointly or separately, is no longer an option. But filing as single isn’t your only choice. You may also qualify for head of household status.

You can file as head of household if:

• You weren’t married (or considered married) as of December 31 of the tax year for which you’re filing; and
• You paid for at least half of the cost of maintaining a home during that tax year; and
• A qualifying person such as a child or other dependent lived with you for at least half the year, or was absent for an acceptable reason, such as staying at college.

You may have noticed that you can qualify for head of household filing status if you weren’t “considered married” as of December 31 of the tax year. What does that mean? To qualify for head of household although you were technically married, you must meet certain criteria, including:

• You and your spouse lived separately from at least July to December of the tax year (temporary absences, such as military service, business trips, etc. don’t count); and
• You paid for at least half the cost of maintaining the home during the tax year; and
• You and your spouse file taxes separately.

Benefits of Head of Household When Filing Income Tax

Why might you want to file taxes as head of household if you are eligible? There are a number of advantages for most people, and this tax status is often more desirable than either single or married, filing separately. Someone filing as head of household can claim a higher standard deduction ($18,000) than someone filing single ($12,000). Another benefit is getting a much more favorable tax rate.

If you have a dependent child, you may also qualify for a number of tax credits, including the Child Tax Credit (CTC), Earned Income Tax Credit (EITC), and Child and Dependent Care Credit. (You don’t necessarily have to file as Head of Household to benefit from these credits, as long as you are able to claim a child on your income tax return.)

Of course, divorce changes your income taxes in many ways besides changing your filing status. If you have been divorced since the last time you filed your taxes, it’s a good idea to speak with a professional tax preparer about minimizing your taxes, or maximizing your refund, this time around. And if you have not yet finalized your divorce, be sure to discuss with your family law attorney the effects that various decisions (such as how many nights your children will spend with each parent) could affect your taxes next year.

If you have questions about your divorce and taxes, we invite you to contact our law office to schedule a consultation.