No one wants to think about divorce. Its impact is far-reaching, affecting people’s home life, family, work, even the way they do their taxes. As if the divorce alone isn’t stressful enough, there’s tax season. Unfortunately, because your situation at home has changed, the way you prepare your taxes will probably change, too. When some event occurs that changes your life, such as a divorce, you’ll want to pay special attention to your tax return, especially these three areas: filing status, exemptions, and alimony. We summarize these important points below. But first—a few reminders.
1. Address changes
For address changes, inform the IRS (use Form 8822, Change of Address).
2. Name changes
For name changes, inform the Social Security Administration (use Form SS-5, Application for a Social Security Card).
3. Withholding amount
For changes to your withholdings on Form W-4, submit a new Form W-4 (Employee’s Withholding Allowance Certificate) to your employer within 10 days after the divorce or separation.
Reconsider your filing status
The filing status you choose determines your standard deduction amount and your eligibility for credits and deductions. Your status as married, separated, or divorced on the last day of the tax year (December 31) will determine whether you choose married filing jointly, married filing separately, or head of household. Visit our Knowledgebase for more about your filing status.
Check your number of exemptions
For each exemption claimed in 2018, you can deduct $4,050 (but there is a phaseout of exemptions if your adjusted gross income [AGI] exceeds $156,900).
Note the two types of exemptions:
1. Personal exemptions (limited to taxpayer and spouse)
2. Exemptions for dependents (remember, a spouse is not considered a dependent)
If you were divorced or separated during the year, you can’t take an exemption for your spouse (even if you fully supported him or her during the year). In addition, if you paid alimony to your spouse, you can’t take an exemption for your spouse since alimony is considered income to the spouse who received it.
Alimony paid to a spouse (or ex) can be deducted by the paying spouse on his or her tax return. Because the receiving spouse must include alimony as income, any legal fees/costs associated with getting the alimony are deductible.
Divorce expenses, such as legal fees and court costs, to obtain a divorce can’t be deducted on your tax return; however, legal fees paid for tax guidance or fees associated with getting alimony are deductible.
About half of married couples in the United States will file for divorce. So, it’s no surprise the IRS has an entire publication devoted to the topic. It covers filing status, exemptions, alimony, qualified domestic relations order, IRAs, property settlements, cost of getting a divorce, tax withholding and estimated tax, and community property. See IRS Publication 504, Divorced or Separated Individuals, for more.
This article is accurate for returns filed through tax year 2017. Under the Tax Cuts and Jobs Act, some of the laws mentioned here will have changed beginning in 2018. Learn more about the updated tax laws enacted under the Tax Cuts and Jobs Act here.