Getting Divorced? What Tax Filing Status Should You Use?May 1, 2017 • By Ginita Wall, CPA, CFP®
If you are in the middle of a divorce, it can be confusing to know what tax filing status to use. With that in mind, we’re re-posting this helpful article from last year, which breaks down all your different options.
Even after the emotional turmoil of a divorce, life goes on, and so do taxes. If you are planning a divorce or in the middle of one, you’ll need to know how to file when tax time comes around again. Do you file jointly or separately?
The answer will depend on when you actually get divorced. If you and your spouse are still legally married by the last day of the year, then you have the ability to file under “Married Filing Jointly” status.
Married Filing Separately
This doesn’t mean you must file jointly. If you are in the middle of a contentious divorce, or if you have been separated for some time, then it is probably a better idea to file under the status of “Married Filing Separately,” which saves you from having to work with your spouse to file together. But using that filing status may cost you more in taxes. When you file separately, your tax rate is higher and you won’t be able to claim education benefits, the earned income credit, child and dependent care, or adoption credit. And if your spouse itemized deductions, you won’t be able to claim the standard deduction. In addition, if you live in California you have to deal with community property allocations and adjustments, which will add extra work and complexity to your tax preparation chores.
Filing as a Single
If you crave that “Single” tax filing status, then make sure your marriage is legally dissolved by December 31st. If you make that deadline, then enjoy filing only for yourself, unless you are claiming “Head of Household” status. To qualify as a “Head of Household,” you must cover over half of the costs to maintain your household and your home must be the primary residence for at least one dependent, usually a child. That means that the dependent must live at your house for more than half the year. Even if you are still married, you can use the more advantageous “Head of Household” filing status if your spouse was not a member of your household for the last six months of the year and you had a dependent child living in your home.
These different tax filing statuses can be tricky, so it may be a good idea to utilize a tax accountant during or after a divorce to make sure you are filing correctly. The last thing you need after an exhausting divorce is a friendly audit from the IRS. Also, your financial situation will likely look very different after your divorce, and you may be qualified different tax breaks and deductions you didn’t qualify for during marriage. For this reason alone, it is probably a good idea to sit down with a tax accountant after your divorce is finalized. (Learn how to Get Your Financial Life Back in Order After Divorce.)
To learn more about the financial side of divorce and how to protect your assets, take a look at our Divorce and Widowhood article archive just for women.