10 Ways to an Effective Divorce – Part 9: Who Pays Taxes in a Divorce?

If you’re currently going through a divorce or separation, the outcome of the process can drastically change your financial and tax status. Each spouse’s situation changes, depending on the structure of the divorce settlement.  Also, the parties’ need to be aware their potential filing status will be affected by the pending divorce.  Planning ahead for these potential land mines is critical. 

Common Questions about Taxes and Divorce

The couple’s filing status for tax purposes is determined as of the last day of the tax year.  If the divorce is still pending, be aware the IRS does not require that the parties file a joint tax return. Along the same lines, a state court judge has no authority to order the parties to file a joint tax return. One party or the other may unilaterally make the decision not to file a joint tax return.  This can substantially impact the other party’s tax liability.

Couples must file as single if the couple is legally divorced and living apart before New Year’s Eve. If either spouse maintains a home for the minor children and can’t file a joint return for the year, you can file as “Head of Household” and get the benefit of a bigger standard deduction. To qualify as Head of Household status, there are several conditions and requirements which must be met.

The IRS governs when it comes to tax liability for property of the parties and payments including alimony and child support. With regards to alimony, the IRS won’t consider the payments as deductible unless certain stipulations and conditions are met within the property settlement agreement or court order.