5 Questions You Should Answer Before Filing Your 2023 Tax Return After Divorce or Separation
Across the United States, filing taxes is a reality that we face each year. For many, this is a daunting—if not downright confusing—task. Yet for those who are recently separated or divorced, filing taxes can start to feel even more complicated than it already is.
The way you file your taxes for this year could look quite different compared to last year. And with changes made to certain laws surrounding divorce and taxes over the last couple of years, it's essential to understand whether these changes will impact what you might be expecting out of your return.
Before this year's tax season goes into full swing, here are five questions to consider before you file your tax return.
1. Should you select "single" or "married" as your tax filing status?
Deeming yourself as single or still married might not seem so straightforward in your everyday life. But with taxes, the answer must be unambiguous.
The question as to whether you are legally single or married is key to your tax return. The IRS states that whatever your marital status was as of the last day of the tax year will determine your filing status for that year. If you acquire a final divorce decree or separate maintenance decree by December 31, your filing status will be "single."
If you do not receive a final decree, you're still married in the eyes of the tax code. According to TurboTax, your status options will be "married filing jointly" or "married filing separately." In this situation, you must weigh the benefits of filing together versus separately.
If you file together, you'll be eligible for a higher standard deduction after combining your income on one return. This also means that you'll share the responsibility of paying any taxes due plus any interest and penalties. This could become problematic if your former spouse or partner has taxes due but does not pay them because you will be liable for them.
If you file separately, you'll avoid holding responsibility for your former partner's tax obligations. However, you won't be eligible for certain tax credits and may end up paying more on your own.
2. Can you file with the status of "head of household" on your tax return?
To file with your status as "head of household," you must meet all of the following requirements laid out by the IRS:
- You're unmarried or "considered unmarried" on the last day of the tax year.
- You've paid more than half the cost of maintaining a home during that year.
- A "qualifying person" has lived in your home for more than half the year. This could be someone you can claim as a dependent like your child or an aging parent who lives with you.
If you're eligible to file with this status, you can claim a larger standard deduction. You'll also be able to have earned more money in the tax year before you're put into a higher tax bracket.
If you wish to file under this status, it's worth investigating if you meet all of the qualifications because it can be very advantageous. Talk to a tax professional if you have any doubts or questions about filing as "head of household."
3. Who claims the children on your tax return after divorce?
Determining who gets to claim your child or children can sometimes be a tough point to determine. Only one parent can claim a child, so if you are filing separately, you'll need to have a plan for this.
If you spelled out exactly who gets to claim your child or children as dependents in your divorce agreement, you'd follow that plan. If you did not or have not gotten that far yet in planning your agreement, now is when you should start thinking of how you'll handle this.
For families with at least two children, you and your co-parent could each claim one. If you only have one child or wish to claim all of your children, you'll want to determine how many days you had with your kids over the year. The parent who had custody over the most days will likely get to claim the child or children on their return. You can learn more about Form 8332 in this article.
4. Can you deduct child support or spousal support payments on your tax return?
Unfortunately, both child support and spousal support—otherwise known as alimony—payments are not deductible. They are also not taxable to the person receiving the payments.
Child support and spousal support serve different purposes. Child support payments are meant to benefit the children after divorce or separation. These payments are to be used on things like food, shelter, clothing, health care, and other items they need. These payments are neither deductible nor taxable.
Spousal support, on the other hand, is a type of payment that benefits the former spouse or partner in a relationship. These payments are often intended to help one party maintain a similar style of living that they were used to while still a couple.
As of 2019, a change was made to how spousal support payments are treated in regards to taxes. If your divorce agreements were finalized before December 31, 2018 and you pay spousal support, your payments are tax-deductible. If your agreements were finalized after this date, you cannot deduct these payments.
5. Are divorce expenses, like legal fees, tax-deductible?
Similar to child support and spousal support, legal fees related to a divorce are not tax-deductible. Legal costs such as hiring an attorney or counselor are considered personal expenses. However, not all legal costs are non-tax-deductible. TurboTax outlines a few types of fees that you can deduct, such as ones related to your business.
If you have any concerns or questions about what payments you can deduct or must claim as income on your return, speak to a tax professional such as a CPA or a CDFA who specializes in divorce finances. These financial professionals will be able to offer you clear guidance as you prepare your return.
Divorce and taxes are two terms that make many people cringe, but they are two realities that many adults face each year. A basic understanding of these key points will help guide you as you begin preparing to file your first tax return after divorce.
NOTE: Many state and federal laws use terms like ‘custody’ when referring to arrangements regarding parenting time and decision-making for a child. While this has been the case for many years, these are not the only terms currently used to refer to these topics.
Today, many family law practitioners and even laws within certain states use terms such as ‘parenting arrangements’ or ‘parenting responsibility,’ among others, when referring to matters surrounding legal and physical child custody. You will find these terms as well as custody used on the OurFamilyWizard website.