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Divorce and Taxes: Start With Your Status

Taxes are complex even when you aren’t in the middle of a divorce. If you are in the process of divorcing or have recently finalized your divorce, you likely have lots of questions about your taxes — starting with your filing status. This article, while not designed to function as tax advice, will detail the filing statuses available to you and help you understand what questions to ask your tax expert when making a final decision about your filing status.


What Is My Status?

It’s likely that up until now, you’ve been filing as either Married Filing Jointly or the less common Married Filing Separately. In general, there are four filing statuses you might use during and just after your divorce:

Married Filing Jointly

This status is used by people who are legally married and choose to file a return together. This is likely the status you’ve been using, and you may continue to use it as long as you remain legally married. Filing a joint return will require you and your soon-to-be-ex-spouse to cooperate.

Married Filing Separately

This status is used by people who are legally married but wish for each member of the couple to file their own stand-alone return. You may wish to use this status during the year of your divorce. Using this status will be more complicated if you live in a community property state (as opposed to an equitable division state).[1]

Head of Household

This status is used by people who are unmarried and who can claim a dependent. You may wish to use this status after you are divorced if you are the primary custodian of any children of the marriage. Seek counsel from a qualified tax advisor if custody is shared equally between you and your ex-spouse.

Single

This status is used by people who are unmarried and can’t claim a dependent. You would use this status after your divorce if you are not the primary custodian of any children of the marriage.


Timing Matters

Your filing status for a given tax year is dictated by your marital status on the last day of that tax year. For example, if you are married at the start of 2018 and divorced by December 31, 2018, you are considered unmarried for the 2018 tax year. Alternatively, if you are married at the start of 2018 and divorced on January 1, 2019 (but not before), you are considered married for the 2018 tax year.

It is important to speak with your tax advisor about the correct filing status for your tax return in any given year, since the filing status you elect can have a meaningful impact on taxes owed.[2]


Filing Separately in a Community Property State

A wrinkle that we see here in Texas and other community property states is the use of Married Filing Separately status by couples who are still married in a given tax year but who do not want to prepare a return together. Because of the rules surrounding community property, it is technically incorrect to prepare a Married Filing Separately return without input from both spouses.

The correct procedure is to prepare a Married Filing Jointly return and then use Form 9858 to allocate the income and tax burden between the spouses. If your spouse is unwilling to cooperate with you in the preparation of a tax return, you’ll need to seek advice from a qualified tax professional as to the best method for filing your taxes.

Seek Advice

Any time you have a question about taxes, it’s important to seek advice from a qualified professional, like a Certified Public Accountant or a Federal Tax Return Preparer. Your attorney or financial professional can often refer you to someone they know and trust. Though divorce can make the already-complex tax process even more challenging, understanding your filing status options can be a good place to start.

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[1] In a community property state, money earned by either spouse during the marriage is legally owned in equal share by both spouses. This means each spouse also equally shares the tax liability on each dollar earned.

[2] The IRS offers an online tool to help you determine which filing status you qualify for. Visit https://www.irs.gov/help/ita/what-is-my-filing-status to access this tool.