Couples that have recently ended their marriages or who are still in that process need to know how to handle one major obligation: their taxes.
Here are some basics about taxes after divorce you should know:
1. According to the IRS, your marital status on Dec. 31 controls your tax obligation.
If you’re still legally married at the end of the year, you have the option of filing jointly or picking the “married but filing separately” option. The tax consequences of your choice can be significant, so it’s often wise for couples who are divorcing to navigate their taxes together.
If you’re actually divorced as of the last day of the year, you’ll have to choose whether you file taxes as “single” or “head of household.” If you aren’t sure which to pick, a tax professional can help. (Keep in mind that “head of household” often confers more benefits — so the choice is significant.)
2. If you have children, you have to decide who gets to claim them as dependents.
Even if you split the financial obligations for the children down the middle and share physical custody, you and your ex-spouse can’t both claim them as dependents. Your ability to claim “head of household” on your taxes may depend on your right to claim one or more of the children on your taxes. That can also determine your right to take the child tax credit, claim the earned income tax credit and take deductions for child care expenses and other significant costs.
3. The rules on alimony (spousal support) have changed.
Child support is never tax deductible and isn’t considered taxable income to the recipient. The rules on spousal support, however, have undergone a major change. The payer of spousal support (for divorces after 2018) can no longer deduct that alimony from his or her income. It’s no longer taxable income to the recipient, either.
Some of these issues can be negotiated through your divorce attorney, who can help you try to work out an agreement that’s mutually beneficial to both parties. It’s also important, however, to make sure you get the advice of an experienced tax professional after your divorce.