Hi, I’m Bette Hochberger, CPA, CGMA. In today’s quickie, I will discuss a quick guide to filing taxes after a divorce. Divorce can be a highly emotional and stressful experience, so it’s no surprise that tax implications may not be the first thing on your mind, but as you navigate the complexities of divorce, it’s important to remember your tax situation to avoid any unpleasant surprises down the road.
Here are some essential things to consider and plan for to help you stay on top of your taxes during this challenging time.
Determine Your Filing Status
After a divorce, your filing options depend on when the divorce is finalized. A joint return won’t be possible if it’s on or before December 31st. However, if the divorce is finalized after the new year, you can still file a joint return for the previous year.
On the other hand, you can choose to file separately as “married filing separately.” If you can’t file a joint return, consider filing as head of household to save money, but keep in mind that only one of you can do this if you share custody of a child. Remember this as you explore your options to make the best financial decision for your situation.
To qualify for the head of household status when filing taxes after divorce, you must meet three requirements:
- On the last day of the year, you must be considered unmarried, which means you were single, divorced, or legally separated.
- You must have paid over half the costs of keeping up a home for the year. These expenses may include real estate taxes, home insurance, repairs, utilities, and food consumed in the home.
- You must have lived with a qualifying dependent, such as a child or another dependent, for at least six months of the year.
Update Your W-4
Are you and your spouse both employed? If so, it’s important to know that you must complete a W-4 form to ensure that your employer withholds the correct amount from your paycheck. As joint filers, you must divide your W-4 withholding between spouses.
BAfter a divorce, recalculate and adjust your allowances to ensure you’re paying the right amount of taxes and that your paycheck reflects your current needs.
Alimony and Child Support
If your divorce or separation agreement was finalized before January 1, any alimony payments you make can be deducted as an above-the-line deduction when filing taxes. But, as with all things tax-related, it’s wise to double-check with an expert to ensure you’re eligible for the deduction.
Report alimony received before January 1 from a finalized divorce on Form 1040 as income. Don’t forget that if you make or receive alimony payments, you can’t use Forms 1040A or 1040EZ.
Child support payments are not tax-deductible for the payer, and the receiver doesn’t need to report them as income.
Who Can Claim Children As Dependents?
Knowing who can claim them as dependents when you file your taxes is important if you have children. This is because it can affect the tax credits you can claim and your filing status.
The custodial parent is the one the child lives with for more nights during the year. Custodial parents can claim their child as a dependent for tax credits, while non-custodial parents may claim other credits with Form 8332.
I hope you learned something new today. As always, stay safe, and I will see you next time.