Divorce and Taxes

Separating or Divorcing?

When your marital status changes, your tax situation will change as well. Once you have a final divorce decree or separate maintenance agreement, you will need to file a new Form W-4 with your employer to adjust your withholdings.

Marriage Status on December 31st

What if you are still married at the end of the year? For filing purposes, you will be treated as married for that filing year.

Filing Status

You can use the IRS What is My Filing Status Tool to help determine whether you should file as Married Filing Jointly, Married Filing Separately, Head of Household, or Single.  Single status is available once the divorce decree or separation agreement is final.

Alimony and Federal Taxes

Alimony (or separate maintenance payments) paid after 2018 aren’t deductible by the payer spouse, and not taxable to the recipient spouse Alimony or separate maintenance payments before 2019 may continue to be deductible by the payer and taxable to the recipient.  However, there are exceptions for agreements modified after 2018 (see IRS Tax Tip 2022-92).

Property Transfers

In the case of divorce, you don’t need to file a gift tax return unless you make any of the following transfers:

  • a terminable interest
  • to certain charitable remainder trusts
  • a future interest, or
  • to a non-US citizen spouse

Generally, there is no gain or loss on transferring property between spouses/former spouses.

Dependent Children

The parent with custody of the child/children generally claims them on their tax return. If parents have joint custody, they can either decide who will claim the child/children or use IRS tie-breaking rules, which can be found in Publication 504 – Divorced or Separated Individuals, page 11, if they can’t agree.

Child Support

Child support payments are not deductible by the payer. They are also not taxable to the payee.

For more information, please see IRS Tax Tip 2022-92 (see above) or contact us at 401-831-0220.

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