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How does divorce affect your taxes?

On Behalf of | Feb 8, 2022 | Divorce

After a divorce, couples will likely experience dramatic changes to every aspect of their lives. From the loss of spending power to increased independence, the former couple must independently work to create two futures from one household. Unfortunately, even a simple financial error on commonplace paperwork can lead to catastrophic results.

In filing a tax return, people must pay careful attention to numerous factors. While the IRS attempts to clearly spell out rules and restrictions, a recently divorced couple can see dramatic changes to the elements of the return they might have become used to completing with ease, such as:

  • It changes your filing status: In what is likely the most obvious change, the divorce changes your marital filing status. The IRS uses filing status to determine filing requirements, standard deductions and the correct tax the individual must pay. A legal professional or tax expert can provide advice tailored to your unique situation, as the timing of the divorce relates directly to the five different filing statuses.
  • It could change your exemptions for children: Based on the determination of parenting time responsibilities, the divorce could change your exemptions for the children. For example, if the child lives with you for the majority of the year, you can likely continue to claim the child as a dependent.
  • It could change deductions: Most often, the court will order one party to pay alimony or spousal support to the other party based on financial needs. These payments for spousal support are likely deductible for the paying party and reported as income for the receiving party.

Every situation is unique and the last thing an individual should do is run afoul of the IRS over a simple misunderstanding. It is wise to seek the guidance of either a tax expert or legal professional to answer questions specific to your situation.