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How Does Divorce Affect Your Tax Filing Status?

Your marital status on the final day of the year determines how you may file. Married couples generally file jointly but if you are divorced as of December 31, you can file either as single or as head of household, so long as you qualify. Being separated or subject to a child support order does not affect your status although you can claim head of household if you are not divorced.

Separated or Married

Generally, you can be considered “unmarried” if you are legally separated as of December 31. Because Florida has no legal separation status, you are considered married even though you can have a legal separation agreement. Under IRS law, you must be legally separated under state law to qualify as single for IRS filing purposes.

However, if you come to Florida from another state where a legal decree of separation was issued, you can file as a single person. If you are a Florida resident who is married but separated, you may file as unmarried if:

  • you maintain as your principal place of residence a home wherein a child of yours has lived for the last 6 months of the taxable year and,
  • you furnished more than one-half of the cost of maintaining the household, and
  • you are entitled to the dependency exemption

Benefits to Married Filing Jointly

Depending on your incomes, deductions and credits, filing jointly usually means you will pay your taxes at a lower rate. If your incomes are about the same, then filing separately may make more sense since combining them may put you in a higher tax bracket. If they are not, then filing separately will put you in different tax brackets so your taxes will be higher than if you filed jointly.

Filing jointly also makes you eligible for the earned income tax credit, adoption credit or the child and dependent care credit

A major drawback to filing jointly is that you are jointly and severally liable for unpaid taxes, deficiencies and penalties including any tax debt owed before the marriage. You can protect yourself if you both agree to file jointly and your spouse is preparing the returns by entering into a stipulation for tax indemnification. This would state that your spouse would be liable for any amounts due on previously filed joint returns. Your agreement can also provide that your portion of any tax refunds issued be paid by your spouse to you or have it routed to a joint account. If paid by check, you can have it paid jointly

Benefits to Married Filing Separately

Determining whether to file married jointly or separately largely depends on the deductions available such as mortgage, charitable and real estate taxes. When filing separately, you have to choose either the standard deduction or itemize them. With lots of deductions, filing jointly may not be your best option.

By filing separately, though, you lose the ability to claim earned income and other breaks like higher education tax credits.

Dependency Exemptions

Only one of you may claim your children for that tax year. In most cases, the parent who is the primary custodian may claim it. There are conditions whereby the noncustodial parent can claim the dependency exemption, which include:

  • the custodial parent must sign IRS Form 8332, Release/Revocation of Claim to Exemption for Child by Custodial Parent and
  • the noncustodial parent attaches the signed form to his/her tax return

The release may be revoked by the custodial parent for any subsequent tax year.

Child Support and Spousal Support (Alimony)

Spousal support, or alimony, is awarded for various reasons but is generally ordered so that a spouse who is financially disadvantaged is able to enjoy a standard of living similar to that enjoyed during the marriage. Regarding the tax consequences, the paying spouse is allowed to deduct the amount paid and the recipient spouse must include it as part of income received. This can have the effect of placing the paying spouse in a lower tax bracket and the recipient spouse in a higher tax bracket. Another consideration for the spouse receiving alimony is to receive enough to account for the taxes that will have to be paid.

Regarding child support, the paying spouse is not permitted to deduct that from his/her taxes and the recipient spouse does not include it as income so that the amount is not taxed.

If you are getting divorced or have a legal separation decree from another state, or you qualify as head of household, talk to an experienced family law attorney about the tax consequences and whether filing jointly or separately is the right option for you if this choice is available.  You should also discuss your tax options and implications with a certified public accountant.