Here’s what HIVE AI had to say about “How does getting divorced affect my filing status and deductions this year?”:
Getting divorced can significantly impact your tax situation, particularly regarding your filing status and available deductions. Here’s a comprehensive explanation of how divorce affects these aspects of your taxes:
Filing Status Impact
Your filing status is determined by your marital status as of the last day of the tax year (December 31st):
The filing status you can choose depends partly on your marital status on the last day of your tax year. If you are unmarried, your filing status is single or, if you meet certain requirements, head of household or qualifying surviving spouse. If you are married, your filing status is either married filing a joint return or married filing a separate return. IRS – Publication 504: Divorced or Separated Individuals
If Your Divorce Is Final by December 31st
If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year and you can’t choose married filing jointly as your filing status. IRS – Publication 501: Dependents, Standard Deduction, and Filing Information
You’re unmarried for the whole year if either of the following applies: You have obtained a final decree of divorce or separate maintenance by the last day of your tax year. IRS – Publication 504: Divorced or Separated Individuals
The determination of whether an individual is married is made at the close of the taxable year. And, on December 31, if your divorce has been finalized, the record is clear that you are unmarried, your divorce having been finalized. Dawson U.S. Tax Court Opinions: Tony Ray Duncan
In this case, you must file as either:
- Single
- Head of household (if you qualify)
As an unmarried taxpayer, you may qualify for head of household filing status. As relevant herein, section 2(b)(1) defines a “head of household” as an individual who is not married at the close of the taxable year and who maintains as his home a household that constitutes for more than one-half of the taxable year the principal place of abode, as a member of such household, of a qualifying child. Dawson U.S. Tax Court Opinions: Tony Ray Duncan
If Your Divorce Is NOT Final by December 31st
If you were legally married as of December 31, even if you were divorced from your spouse sometime after that, you may not elect the “single” filing status. Dawson U.S. Tax Court Opinions: Fawzi Nona
If you believed yourself to be divorced by the close of the year, but now acknowledge that you were not, for Federal income tax purposes, as of the close of the year you are treated as a married individual. That being so, you do not qualify as a head of household, and your proper filing status is married filing separately. Dawson U.S. Tax Court Opinions: Ricardo Oliva
Your options in this case are:
- Married filing jointly (requires cooperation with your spouse)
- Married filing separately
If you live apart from your spouse and meet certain tests, you may be able to file as head of household even if you aren’t divorced or legally separated. If you qualify to file as head of household instead of as married filing separately, your standard deduction will be higher and your tax may be lower. IRS – Publication 501: Dependents, Standard Deduction, and Filing Information
Impact on Deductions
Standard Deduction Changes
When your filing status changes due to divorce, your standard deduction amount will change:
The standard deduction for a filing status of married filing separate was $6,300 for both 2015 and 2016. See Rev. Proc. 2014-61, 2014-47 I.R.B. 860, 865; Rev. Proc. 2015-53, 2015-44 I.R.B. 615, 620. Dawson U.S. Tax Court Opinions: Jesus M. Santillan
The standard deduction for single or married filing separately is typically lower than for married filing jointly or head of household. This means you may have less of a tax benefit from the standard deduction after divorce.
Itemized Deductions
Your filing status is used in determining whether you must file a return, your standard deduction, and the correct tax. It may also be used in determining whether you can claim certain other deductions and credits. IRS – Publication 504: Divorced or Separated Individuals
Some specific deduction impacts include:
- Student Loan Interest Deduction: If you continue deducting your student loan interest, be aware that married taxpayers are allowed a higher modified adjusted gross income before the deduction phases out. See § 221(b)(2). Dawson U.S. Tax Court Opinions: Amanda Renee Stewart, Petitioner and Ahmed Zied, Intervenor
- Alimony: Alimony paid under a divorce decree or separation instrument dated before 2019 is deductible by the payer and included in taxable income to the payee. You can’t deduct alimony or separate maintenance payments made under a divorce or separation agreement (1) executed after 2018, or (2) executed before 2019 but later modified if the modification expressly states the repeal of the deduction for alimony payments applies to the modification. Alimony and separate maintenance payments you receive under such an agreement are not included in your gross income. IRS – Publication 1819: LifeCycle: Divorce and non-custodial, separated, or never married parents
- Legal Fees: Amounts paid as damages for breach of promise to marry, and attorney’s fees and other costs of suit to recover such damages, are not deductible. Generally, attorney’s fees and other costs paid in connection with a divorce, separation, or decree for support are not deductible by either the husband or the wife. However, the part of an attorney’s fee and the part of the other costs paid in connection with a divorce, legal separation, written separation agreement, or a decree for support, which are properly attributable to the production or collection of amounts includible in gross income under section 71 are deductible by the wife under section 212. Tresuary Reg. 1.262-1
Tax Credits Impact
Your eligibility for certain tax credits may change after divorce:
- Child Tax Credit: Only one parent can claim a child as a dependent in a given tax year after divorce.
- Earned Income Credit: Your filing status and income will affect your eligibility.
Because a portion of the child tax credit is treated as refundable, your entitlement to the deductions here in dispute, more likely than not, would result in a reduced deficiency. Dawson U.S. Tax Court Opinions: Ricardo Oliva
Practical Considerations
- Documentation Requirements: When claiming deductions, you need to track your expenses and provide evidence to substantiate your claimed deductions. If you claim expenses as deductions under Schedule C that were in fact expenses incurred as an employee, they should have been claimed on Schedule A. Without substantiation of your claimed deductions, they may be disallowed. Dawson U.S. Tax Court Opinions: Fawzi Nona
- Filing Status Verification: Will your filing status change? Changing your filing status can make a difference in your taxes. Use the What is My Filing Status? assistant to determine what filing status you should use on your tax return. Tip: If you’re legally separated or divorced at the end of the tax year, file as single unless you’re eligible to file as head of household or you remarry by December 31. IRS – Publication 5802: Divorce & Taxes Checklist
Planning Ahead
If you’re in the process of getting divorced, consider these tax planning strategies:
- Timing of Divorce Finalization: The date your divorce becomes final can significantly impact your tax situation for that year. Consider the tax implications when deciding whether to finalize before or after December 31.
- Tax Liability Comparison: If you have income, you may want to figure your tax both on a joint return and on separate returns (using the filing status of married filing separately). You can choose the method that gives the two of you the lower combined tax unless you are required to file separately. IRS – Publication 501: Dependents, Standard Deduction, and Filing Information
- Update Your Withholding: After divorce, you should update your W-4 with your employer to reflect your new filing status and avoid potential underpayment penalties.
Sources
- IRS Publication 504: Divorced or Separated Individuals
- IRS Publication 501: Dependents, Standard Deduction, and Filing Information
- IRS Publication 5802: Divorce & Taxes Checklist
Try Your AI Tax Assistant for Free!
Ready to transform your practice with agentic AI in tax? See firsthand how our cutting-edge AI tax tools can revolutionize your approach to tax research and planning.