Filing Taxes After Divorce

A divorce is one of the most difficult things a person can go through. It’s usually a long, hard road for everyone involved.

A lot of things change after a divorce, and it can be stressful. But you know what? You’re going to get through this, and you’ll be stronger for it. There’s light at the end of the tunnel, even when you feel like everything’s shifting under your feet.

Some of the biggest changes people face during a divorce happens with their finances—whether that’s finding a new job, paying legal fees, or making sure you get alimony or child custody payments. And all of those financial changes make filing your taxes that much more complicated.

So, let’s look at everything you need to know about filing taxes after divorce so you can be confident about your tax return.

Determining Your Filing Status

Let’s start with the basics. Which filing status should you choose after going through a divorce? Well, it depends on when your divorce became final.

• If your divorce is not finalized by December 31 of the tax year, the IRS still recognizes you as married for that tax year, so you can still choose married filing jointly as your status.

There are a few advantages to filing jointly: You have a higher standard deduction, you get more tax credits, and it’s easier to claim your kiddos as dependents.

But filing jointly also means you’ll have to collaborate with your soon-to-be ex on your taxes, and if that’s not an option for you, don’t sweat it. You can also file as married filing separately if your divorce isn’t final by the last day of the year.¹

• If your divorce is final on or before December 31 of the tax year, you can’t file as married filing jointly. Instead, you’ll need to file as single or head of household.²

Head of household filing status has two main advantages over filing single or married filing separately: More of your taxable income falls into lower tax brackets and you get a higher standard deduction. Sounds like the way to go, right?

But to qualify for head of household, you have to meet a few important requirements:³

• Again, you must be considered unmarried on the last day of the tax year.
• You must have a qualifying child or dependent (more on who qualifies as a child or dependent below).
• Your qualifying child or dependent must be related to you and have lived with you for more than 183 days in the year (more than half the year).
• You must pay for more than half of the household expenses.

You also have to file an individual tax return and not be claimed as a dependent yourself on someone else’s return. Uncle Sam considers that double-dipping—without the chips.

Updating Your W-4

Okay, folks. This is a simple but super important change you’ll need to make after going through a divorce.

If you’re employed, you probably filled out a W-4 form for your HR department on your first day on the job. Sound familiar? It’s the form that tells your employer how much to withhold from your paycheck for taxes.

Now, when you’re married filing jointly, you usually split your W-4 withholding amount pretty evenly between you and your spouse. That’s because you’re only filing one tax return together.

But when you’re going through a divorce and can no longer file jointly, you’ll need to fill out a new W-4 to adjust your withholding.

Don’t settle for tax software with hidden fees or agendas. Use one that’s on your side—Ramsey SmartTax.

This should be on the top of your to-do list—do it as soon as possible so you won’t get hit with an outrageous tax bill next year! That’s the last thing you want added to your plate when you’re already dealing with the financial and life changes that come with divorce.  

Changing Your Personal Information

When you go through a divorce, you’ll have a long list of places, people and services who’ll need to know your new information.

It may take a while to update all your info at your work, your bank, your kids’ schools, and all the online services you use. But here's the deal—if you change your name or mailing address, the IRS needs to know that information before you file your taxes.

• If you change your mailing address, use tax Form 8822, Change of Address, to let the IRS know.

• If you change your name, you must let the Social Security Administration (SSA) know before filing taxes. You’ll need to replace your Social Security card with a new one that lists your new legal name. To get a new card, just fill out the SSA’s Form SS-5, Application for a Social Security Card and submit it.

Why is this so important to do before filing your taxes? Because if the name on your tax return doesn’t match SSA records, it could throw up a red flag, and processing your return will likely take Uncle Sam a lot longer than it already does. Don’t procrastinate on this—it could turn into a major headache if you do!

Claiming Children as Dependents

If you’re going through a divorce and wondering whether you’ll be able to claim your children as dependents (and receive the tax credits that go along with having dependents), the answer depends on whether or not you’re the custodial parent.

Who Can Claim Children as Dependents?

You’re eligible to claim your kids as dependents if you’re the custodial parent—which just means you’re the parent your children lived with for the majority of nights during the tax year.⁴ A divorce agreement will usually name the custodial parent.

Being the custodial parent also means you can claim a couple of specific tax credits: the earned income tax credit (EITC) and the child and dependent care credit. But keep in mind that you’ll also have to meet other qualifications besides having dependents to qualify for these credits.

Who Can’t Claim Children as Dependents?

If your kids lived with you fewer nights during the tax year than with your ex-spouse, you’re considered the noncustodial parent for tax purposes . . . which means you can’t claim your kids as dependents.

Being the noncustodial parent also means you can’t claim:

• Head of household filing status
• The earned income tax credit (EITC)
• The child and dependent care credit⁵

But there is one exception to the custodial rules when it comes to tax credit eligibility, so without further delay:

The One Exception

Let’s say you’re the noncustodial parent. You can claim a child as a dependent if your ex-spouse signs Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. (Whew, now that’s a mouthful!)

Here’s how it works: The custodial parent completes and signs one Form 8332 per child. Then the noncustodial parent attaches those forms to their tax return.

The noncustodial parent still won’t be eligible for the EITC or the child and dependent care credit, but they will be eligible to claim the child tax credit and the additional child tax credit.

But keep in mind that if you’re the custodial parent in this equation, signing the form means you can no longer claim the child as your dependent, and you can’t revoke this change until the following tax year.⁶

How Does Alimony Affect My Taxes?

Alimony is a one-time payment or a series of payments one spouse makes to the other after their marriage ends in divorce. The purpose is to help pay for clothing, transportation, housing, food and other living expenses—whether or not a couple has kids (because alimony is different from child support).

So, how does paying or receiving alimony affect your taxes? Well, it depends on when your divorce took place:

• If your divorce was finalized on or before December 31, 2018 and you’re paying alimony to your ex-spouse, you can take a tax deduction for the payments, even if you choose to take the standard deduction instead of itemizing.

• If your divorce was finalized on or before December 31, 2018 and you’re receiving alimony payments, you have to include those alimony payments as part of your taxable income.

• But if your divorce was finalized any time after December 31, 2018, alimony payments are not deductible for the spouse who pays them, and they also won’t count as taxable income for the spouse who receives them.⁷

Whether you’re paying or receiving payments, It’s a good idea to sit down with your tax advisor and confirm how alimony is going to affect your taxes.

A tax pro can go over all the details and make sure that your payments meet the IRS’s qualifications for alimony (for example, those payments have to be made in cash, and they must be required by your divorce agreement).⁸  

If you don’t already have a tax advisor in your corner, check out our RamseyTrusted tax pros. They bring years of experience to the table and can help you navigate all the rules about what counts as alimony and whether it can help you save on your taxes or not.

Tax Deductions After Divorce

Alimony payments aren’t the only financial changes that can affect your taxes after divorce. You might also be receiving or paying child support or covering your kiddos’ medical expenses. Plus, there are usually legal fees involved to finalize a divorce.

So, how do these changes factor into your tax return? Let’s take a look.

Child Support

Child support is money paid from one parent to the other parent to take care of their children’s needs. Most of the time, the parent receiving the child support is the one who has custody. These payments usually happen monthly and are paid until the child grows up.

How child support payments affect your taxes is pretty straightforward, no matter when your divorce was finalized. If you’re receiving child support from your ex, you don’t have to report it as income on your tax return. If you’re the one making child support payments, you can’t deduct those payments.⁹

Medical Expenses

Whether you’re the custodial parent or not, life still happens.

Your kids will still bring home the latest strand of strep that’s going around at school, break an arm sliding into home base, or need stitches after their first fishing lesson ends not-so-successfully.

But here’s the good news: Generally speaking, if you pay your child’s medical or dental bills at any point after going through a divorce—even if your ex-spouse has custody of your child and claims them as a dependent—you can include those expenses in your medical expense deduction.

Just keep this in mind: To claim medical expenses deductions, you have to itemize. And on top of that, you can only deduct medical expenses that exceed 7.5% of your adjusted gross income (AGI).¹⁰

For example, let’s say your AGI is $60,000. In that case, you can’t deduct the first $4,500 ($60,000 x 7.5%) of your medical expenses. But if your medical expenses throughout the year totaled, say, $6,500, you would be able to deduct the last $2,000.

Whew! Those deduction calculations can get pretty complicated. And they’re only worth the trouble if you can save more money by itemizing. That’s pretty rare in the tax world. Most of the time, you’ll end up saving more by taking the standard deduction.

Legal Fees

Legal fees can add up quickly when you’re going through a divorce, even if you and your ex are on good terms and things aren’t too messy. In most divorce cases, both parties hire attorneys, and some people hire a financial advisor or tax advisor too (which isn’t a bad idea!).

Unfortunately, you can’t deduct divorce-related legal expenses on your taxes. And Uncle Sam has a long list of things included in that category:¹²

• Lawyer fees and litigation (the actual process of going through the court system to finalize a divorce)
• Legal fees you pay to get alimony
• Fees for financial counseling
• Fees for tax advising
• Fees for personal counseling
• Legal fees you pay for a property settlement
• Fees you pay for your ex-spouse, unless those payments qualify as alimony

It’s a bummer that you can’t deduct these kinds of legal fees from your taxes when you’re going through a divorce. But don’t let that fact stop you from hiring a professional to help advise and guide you through the rough patches! It’s always a good idea to work with an expert when you’re dealing with the personal and financial changes that divorce can bring.

Work With a Tax Expert

Filing taxes after divorce can be a double dose of stress. That’s why we recommend working with a tax pro. They do this for a living, and it’s their job to know how divorce affects your taxes!

When you’re going through a big life change, sometimes it can cloud your vision. But a tax advisor can look at your tax situation with 20/20 vision. It’s worth paying for their knowledge and expertise when you’re dealing with the KGB—er, the IRS.

If you’re ready to get started, check out our RamseyTrusted tax pros. Whether you’re currently going through a divorce or your divorce is already finalized, our tax experts can look at your tax situation and help you file with less stress.