The information in this article is up to date through tax year 2019 (taxes filed in 2020).
A lot of things change as a result of a divorce, including your tax situation. You’ll need to make certain updates so the IRS can understand your new circumstances. Will you be dealing with alimony payments? The 2018 Tax Cuts and Jobs Act affected how that is treated on a tax return. Read on for tax tips and steps to take once your divorce is finalized.
The IRS needs to be informed when your legal name and address have changed.
- Address changes – If you moved addresses as a result of your divorce, use Form 8822, Change of Address, to inform the IRS.
- Name changes – To change your legal name for tax purposes, inform the Social Security Administration using Form SS-5, Application for a Social Security Card.
After your divorce, you need to make sure you are having the correct amount of income tax withheld from your paycheck for your new circumstances. For example, you should no longer be receiving an allowance for being married. Your total household income will have changed as well, and this will impact how much you owe. Fortunately, updating your withholdings is easy. You’ll simply complete a new Form W-4 and submit it to your employer to account for your new marital status.
Read also: When to Check Your Withholdings
Your tax filing status is very important in determining your tax liability, and it will most likely change after your divorce. Depending on your filing status, you could be eligible for certain tax breaks and ineligible for others. For example, you cannot claim the Earned Income Tax Credit if your status is married filing separately. Consider these facts:
- Your marital status on December 31st decides your tax filing status for the whole year.
- If you are still married on December 31st, you won’t be able to file your return as single. On the other hand, if your divorce is finalized during the year, you can’t file as married.
- If you and your spouse have lived separately for more than six months and you pay more than half of your household expenses, you could qualify for head of household status. Otherwise, you will need to choose to file separately or jointly.
If your divorce was settled before December 31, 2018, and you are the one paying alimony, you can deduct those payments on your return. If you received alimony, it is considered taxable income. But any legal fees/costs associated with getting the alimony are deductible.
On the other hand, if your divorce is settled after January 1, 2019, you are subject to a different tax code under the Tax Cuts and Jobs Act. According to the new law, you cannot deduct alimony you paid to your former spouse. If you are the one receiving alimony, you don’t need to report it as taxable income.
This section only applies if you are filing back taxes for tax years before 2018.
The Tax Cuts and Jobs Act eliminated the $4,050 personal exemption beginning with returns filed in 2019. For years before 2018, you can deduct $4,050 from your taxable income for your spouse and any dependents. However, if you were divorced or separated during the tax year, you can’t take an exemption for your spouse (remember, a spouse is not considered a dependent).
When two parents divorce, only one of them can claim their children as dependents on their tax return. Generally, it is the custodial parent – the person the children live with for most of the year – who gets to claim them. If custody of the children is shared equally, then the dependents can be claimed by the parent with the highest Adjusted Gross Income.
Divorce Tax Deductions
Divorce expenses, such as legal fees and court costs, incurred 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.
Filing as Divorced with TaxSlayer
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