Divorces can get incredibly complicated — particularly when tax season rolls around.

When you and your husband or wife split up, you’re going to face a number of different (and sometime difficult) choices in terms of your filing status. Those choices may also restrict your access to certain tax credits, deductions, or impact on how much you can claim for dependents.

Don’t let all of these complications overwhelm you, because we’re here to help.

To guide you through the process, we’ll explain the different filing statuses available to you pre-divorce and post-divorce, whether alimony and legal fees are tax deductible, and who can claim any children you might have on your return after the divorce.

Key Takeaways

• When you divorce midyear you'll be filing using one status for the first part of the year, and then using a different filing status for the remainder of the year.

• After your divorce is finalized, you’ll need to update your information withthe Social Security Administration and file a new Form W-4 to the IRS.

• If you and your spouse are in a good place, it's normally cheaper to file as a married couple for the portion of the year during which you were married.

How Does Divorcing Midyear Affect Your Tax Return?

If you and your spouse decide to separate at some point during the tax year, there will be inevitable effects on both of your tax returns. But the level of impact will depend on a few key factors.

First and foremost, there’s the issue of legal separation.

Under IRS rules, you and your spouse are still technically married until your divorce is final. That means if you’ve filed for divorce at some point during the tax year but it doesn’t go through before New Year’s Eve, your tax code says that you’re still legally married. 

This rule applies until a court has stated that you’re divorced or legally separated.

If you’re estranged (but not divorced), there are several alternative filing options available to you — and we’ll cover those in just a minute. But if your divorce does get finalized halfway through the tax year, things get a little complicated.

That’s because you’re going to be filing your next tax return under multiple filing statuses.

“For most tax purposes, you'll be paying as a married couple for the first part of the year, then separately for the remainder of the year,” explains Ben Michael, an attorney at Michael & Associates in Dallas.

“Different circumstances and jurisdictions can change this, but for the most part, your income taxes, mortgage interest deduction, dependent children, and other key factors will function in this way.”

There are enough contributing factors here that you and your spouse will definitely want to consult a professional accountant or tax planner to help navigate these complications. That journey will invariably start by determining what your filing statuses are and when they changed.

How Do You Determine Your Filing Status After You've Separated?

It’s important to note that your tax filing status doesn’t necessarily depend on whether you’re legally married — but if you are married, there will be a wider range of options available to you.

As we’ve already mentioned, your filing status after you’ve separated get dictated by your marital status on December 31 of the tax year. If you’re divorced by the end of the calendar year, you’ve generally got two filing statuses available to you. These statuses are:

• Single

• Head of Household

If you’re filing as a Head of Household, you’re going to benefit from access to a lower tax rate and a higher Standard Deduction. 

But you’re only able to submit your tax return using this status if the following conditions are met:

• You and your spouse must have been living separately for the last six months of the year.

• You must pay more than half the cost of upkeep for running your home.

• Your home must be the primary residence for your dependents for more than half of the year.

If you’re ineligible for the Head of Household status, you’ll need to file as Single (assuming you haven’t remarried by the end of the tax year). 

So, that covers your status for the part of the year you’re legally divorced.

During the period in which you’re legally married, you get to choose from the Single status or the Head of Household status. But you can also opt for:

• Married Filing Jointly (MFJ)

• Married Filing Separately (MFS)

When you file using the MFJ status, you and your spouse combine income and deduct combined allowable expenses. This generally enables couples to lower their respective shared tax liabilities.

Meanwhile, if you go for the MFS status, you and your spouse each report only your own income, deductions, and credits. These go on each of your individual tax returns, and you’re both responsible for your own tax owed.

If you’re in a good place with your former spouse — or at least able to mediate through your attorneys or tax professionals — it’s typically worth working together on your returns as a way to save money.

“If the divorcing couple can cooperate, it's usually financially advantageous to file as a married couple for the portion of the year during which you were married,” says Ben Michael of Michael & Associates.

As a point of reference, the Standard Deduction for the 2023 tax year is $13,850 for single filers. But if you’re filing jointly, you’ll benefit from a Standard Deduction of $27,700. You’re also open to a wider range of tax credits like the Earned Income Tax Credit and the Child and Dependent Care Tax Credit.

That means you’d likely be able to minimize your tax bill for half the year using the MFS status.

Does Your Tax Withholding Amount Generally Change if You Separate From Your Spouse?

Your “tax withholding” is the amount of cash that your employer is holding back from your monthly paycheck that then gets paid directly to the IRS on your behalf. 

This is an important consideration when filing your taxes because you’re able to lower your tax withholding amount by asking for additional money to be docked from your pay.

But when you get divorced midyear, withholding amounts can change. Withholding amounts can change alongside your marital status and whether you’re the parent claiming kids as dependents on your tax return post-divorce. 

“Withholding should typically be changed as soon as you are aware in a year that your filing status will be changing,” says Diana A. Crawford, CPA at Crawford, Merritt and Company.

“If couples jointly operate businesses or have disproportionate incomes, they may be required to make estimated tax payments while they are married. Great care and caution should be made to report the estimated tax payments to the proper spouse in a year where you may not end up filing jointly.”

Are Alimony and Separate Maintenance Payments Tax Deductible?

Some of the key financial interactions between divorced couples tends to be alimony payments or separate maintenance payments — and up until 2018, those payments were all tax-deductible regardless of your filing status.

Unfortunately, the law allowing for this deduction has since changed.

“Alimony and Separate Maintenance payments are no longer tax deductible for the payer and not considered income for the recipient after the Tax Cuts and Jobs Act of 2017,” explains Greg O'Brien, CPA and co-founder of Anomaly CPA in Boston. “This is a surprise to many.”

So, don’t get caught off-guard. 

Alimony and Separate Maintenance payments made as a result of agreements after 2018 are neither deductible or includible in income. If alimony or Separate Maintenance payments are made pursuant to agreements entered into prior to 2018, the payments are deductible by the payor and includible in income by the recipient.

Who Can Claim Children as Dependents After a Divorce?

This is a tricky one. But typically, the parent with custody of a child will be able to claim the child on their tax return. If you and your spouse opt for joint custody but not aren’t filing using an MFJ status, you’ll need to work out between you which parent can claim the dependent on their return.

If the two of you can't agree, the IRS has tie-breaker rules that dictate which one of you can claim your kids as dependents on your return.

The IRS will let you claim your children as dependents if they’ve lived with you for a longer period of time during the year. But if each parent has had the kids for the same amount of time, the IRS will let the parent with the higher adjusted gross income (AGI) for that tax year.

“Parents that both contribute more than half of the support of children should specify which parents will claim each child in each year, through the time period that a child would normally complete their college education,” says Crawford, Merritt and Company’s Diana A. Crawford.

“Often, with one child, an alternating year methodology works if there is equal support. In other cases, one parent consistently claims specific children with the spouse claiming other specific children each year.”

If there’s something big enough to affect itemized deductions — like sizeable medical expenses — you and your spouse can strike an agreement on who pays for healthcare pre-tax or post-tax.

The parent who gets to claim their kids as dependents post-divorce is referred to as the “custodial parent”. They’ll also get access to the Child and Dependent Care Tax Credit, American Opportunity Tax Credit, and the Lifetime Learning Education Tax Credit.

If you’re the noncustodial parent, you won’t be allowed to claim any of these credits. You also can’t use the Head of Household Filing status.

How Does Divorce Affect Your Retirement Plans or IRAs From a Tax Perspective?

When you and your spouse divorce, there are a number of IRS forms you’ll need to update regardless of the filing status you’re going for.

These include updating your name, address, and marital status with the Social Security Administration, as well as updating your information with the IRS by filing a new Form W-4. But you’ll also need to consider how the divorce may affect other policies or annuities.

“Make sure to update the beneficiary on all retirement plans, life insurance policies, and annuities incident to divorce. Often, divorce settlements will have spouses transferring portions of their accounts to their spouses pre-tax account in property settlement,” says Diana A. Crawford. 

“When considering the division of assets, consideration to pre-tax and post-tax assets should be made as one will carry future tax costs and one will not.”

Can You Deduct Legal Fees When Filing Taxes After Divorce?

Legal fees associated with divorce aren’t usually tax-deductible. The only real exception to this rule is if you’ve accumulated legal fees related to tax advice or obtaining taxable alimony.

“As soon as a divorce is contemplated or imminent, each spouse should plan towards filing a return solely based on their income and deductions. Should the divorce not be finalized by year's end, some alternative strategies should be contemplated,” says Crawford.

Because couples generally stand to save money on their respective tax bills by filing jointly for part of the year, it’s important that you’re able to work closely with your ex-partner and their tax advisor or attorney to get everything right the first time.

That’s where a Family Operating System® like Trustworthy can reduce a lot of friction.

Trustworthy is a digital safe that lets you store copies of all your family IDs, tax information, estate documents, insurance policies, property deeds, and more. You’re then able to add collaborators to your account — enabling your spouse and financial planner to log in and access all the right documents to complete all the necessary tax returns in good time.

Ready to start getting your house in order? Explore Trustworthy and its range of features now.

Frequently Asked Questions

Who Pays Back Taxes After a Divorce?

Both you and your former spouse share responsibility for any tax liabilities incurred during the time in which you were married. 

Who Pays Property Taxes in a Divorce?

The person who’s listed as the property owner on the day property tax is reported will be responsible for paying property taxes. If your divorce isn’t final when taxes are reported, you’re both liable.

How Should I File Taxes if I Was Divorced Midyear?

The best way to reduce your tax liability after divorcing midyear is to use the Married Filing Jointly status for part of the year, and Single of Head of Household status for the rest of the year.