Once your divorce is final, among the various other adjustments you will need to make as you adjust to your new life, you will need to submit your federal tax returns as a single filer. There are some unique considerations to keep in mind the first time you file your taxes after your divorce (and potentially in subsequent years as well), and certain decisions that you make during the divorce process could impact your filing obligations and income tax liability.
As you prepare for your divorce, here are some of the tax-related considerations to keep in mind:
For tax purposes, you are considered unmarried for the entire year in which you get divorced. On the other hand, you must still file as a married couple if, at the end of the year:
Some (but not all) of the expenses you incur during your divorce will be deductible on your first post-divorce return. These include:
Legal fees for other aspects of your divorce cannot be deducted. Court costs are another non-deductible expense.
As a general rule, alimony payments are deductible by the payor and reportable income for the recipient. However, for tax planning purposes, divorcing spouses have the option to designate certain payments as “not alimony,” and other voluntary payments not qualifying as alimony may receive different tax treatment. For the payor, itemization is not necessary in order to claim alimony deductions, although use of the standard Form 1040 is required.
The tax rules for child support differ substantially from those for alimony. As stated by the IRS:
“Child support is never deductible and isn't considered income. Additionally, if a divorce or separation instrument provides for alimony and child support, and the payer spouse pays less than the total required, the payments apply to child support first.”
Importantly, for tax purposes, a payment from one former spouse to another can be considered child support for tax purposes even if it is not specifically designated as child support and is paid in addition to the support required under the parties’ divorce decree.
If you filed joint tax returns during your marriage, you are “jointly and severally” liable for any underreported tax obligations, even if your spouse was the one who did the underreporting. However, if you are facing liability for back taxes incurred during your marriage and you were unaware that your spouse was underreporting, you may be eligible for Innocent Spouse Relief.
If you live in the Carmel area and are considering a divorce, we encourage you to contact us for a complimentary initial consultation. Divorce lawyer Joshua R. Hains has over a decade of experience representing spouses in high-net-worth divorces and other complex family law matters. To speak with Mr. Hains in confidence, please call (317) 688-1305 or request an appointment online today.