Divorce and Taxes
Divorce and Taxes
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Divorce and Taxes
Filing status. Filing status is based on your status as of
December 31. If you are divorced under a final decree
by the last day of the year, you are considered unmarried
for the whole year and you cannot choose Married
Filing Jointly as your filing status. If you are still married
at the end of the year (your divorce is not yet finalized),
then you must file as Married Filing Jointly or Married
Filing Separately, or Head of Household, if qualified.
You cannot file as Single if you are married.
Joint responsibility. You may be held jointly and individually
responsible for any tax, interest, and penalties
due on a joint return filed before your divorce. This
responsibility may apply even if your divorce decree
states that your former spouse will be responsible for
any amounts due on previously filed joint returns.
Name change. If you changed your names because of
divorce, be sure to report the change to your local Social
Security Administration office before filing your tax return.
The name you enter on your tax return must be the
same as what is on your Social Security card.
Exemptions. If you obtained a final decree of divorce or
separate maintenance during the year, you cannot take
your former spouse’s exemption. This rule applies even
if you provided all of your former spouse’s support.
Dependents. In most cases, a child of divorced or separated
parents is the qualifying child of the custodial
parent (the parent with whom the child resides for the
greater number of nights during the year). If the parents
divorced or separated during the year and a child
lived with both parents before the separation, the custodial
parent is the one with whom the child lived for
the greater number of nights during the rest of the year.
Divorce and
Taxes
Deducting Costs of Divorce
Generally, attorneys’ fees and other expenses paid in
connection with divorce are not deductible. Exceptions:
• Fees paid to determine tax or for tax advice on federal,
state, or local taxes of any type are deductible.
• Fees paid to get or collect alimony are deductible.
Fees paid for a spouse or former spouse are not deductible
but may qualify as alimony.
Alimony
Alimony is a payment to or for a spouse or former spouse
under a divorce or separation instrument. It does not include
voluntary payments not made under the instrument.
Alimony is deductible by the payer and must be
included in the recipient’s income. Agreements entered
into after December 31, 2018, are not deductible by the
payer and not included in income by the recipient
Alimony Requirements
Alimony. Payments are alimony if
ALL the following are true:
Not Alimony. Payments are not alimony
if ANY of the following are true:
• Payments are required by
a divorce or separation
instrument.
• Payer and recipient spouse do
not file a joint return.
• Payment is in cash (including
checks and money orders).
• Payment is not designated in
the instrument as “not alimony.”
• Divorced and legally separated
spouses are not members of the
same household when payment
is made.*
• Payments are not required
after the death of the recipient
spouse.
• Payment is not treated as child
support.
• Payments are not required by a
divorce or separation instrument.
• Payer and recipient spouse file a joint
return.
• Payment is:
– Not in cash.
– A noncash property settlement.
– Spouse’s part of community income.
• To keep up or use the payer’s property.
• Payment is designated in the
instrument as “not alimony.”
• Divorced and legally separated
spouses are members of the same
household when payment is made.*
• Payments are required after death of
the recipient spouse.
• Payment is treated as child support.
* A house formerly shared by the spouses is considered one household.
Spouses are not treated as members of the same household if one spouse
is preparing to leave and does in fact leave no later than one month
after payment. Until divorce or legal separation is final, spouses can be
members of the same household.
Designating payments as “not alimony.” Spouses can
agree not to treat otherwise qualifying payments as alimony.
A provision clearly instructing that the payment
Estimated tax. If you made joint estimated tax payments
for the current year and you were divorced during
the year, either you or your former spouse can
claim all of the joint payments, or you each can claim
part of them. If you cannot agree on how to divide the
payments, you must divide them in proportion to each
spouse’s individual tax as shown on your separate returns
for the current year.
Property Settlements and Transfers
If you transfer your home to your spouse or you transfer
it to your former spouse incident to your divorce, you
will not recognize gain or loss. This is true even if you
receive cash, release of marital rights, assumption of liabilities,
or other consideration for the home.
Incident to divorce. Transfers are incident to divorce if
they are:
• Made within one year after the date the marriage ends,
or
• Related to the ending of the marriage—made under
an original or modified divorce or separation instrument
within six years after the date the marriage ends.
Transfers that do not meet these conditions are presumed
not to be related to the ending of the marriage.
Sale of residence. For purposes of the sale of home exclusion
of gain, an owner is treated as using property
as his or her principal residence during any period that
use is granted to a spouse or former spouse under a divorce
or separation instrument.
is not to be treated as alimony must be included in a divorce
or separation instrument or in a written statement
signed by both spouses that refers to a previous written
separation agreement. If spouses are subject to temporary
support orders, the designation must be in an order.
A copy of the written instrument must be attached
to the recipient’s return.
Payments to third parties. Payments to third parties
under a divorce or separation instrument can qualify as
alimony. Payments are treated as received by the spouse
and then paid to the third party. The recipient can claim
deductions for items paid with the alimony.
Home occupied by spouse. If, under the terms of a divorce
or separation instrument, one spouse occupies a
home that belongs to the other, the owner’s payments
for mortgage, real estate tax, insurance, and repairs
are not alimony. Payments for utilities may be alimony.
Rent-free use of property is not alimony.
Child Support
Child support is not deductible by the payer or taxable
to the recipient. Payments specifically designated as
child support in a divorce or separation instrument are
not alimony.
Payments not specifically designated “child support”
are treated as child support if they are reduced either:
• On the happening of a contingency relating to a
child (reaching a specific age or income level, leaving
school, marrying, becoming employed, dying, leaving
the household, etc.).
• At a time that can be clearly associated with such a
contingency.
Underpayment of alimony or child support. If alimony
and child support are both required under a divorce
or separation instrument, and payments are less than
the total required, payments apply first to child support
and then to alimony.
Contact Us
There are many events that occur during the year that can affect
your tax situation. Preparation of your tax return involves summarizing
transactions and events that occurred during the prior
year. In most situations, treatment is firmly established at the
time the transaction occurs. However, negative tax effects can
be avoided by proper planning. Please contact us in advance
if you have questions about the tax effects of a transaction or
event, including the following:
• Pension or IRA distributions.
• Significant change in income or
deductions.
• Job change.
• Marriage.
• Attainment of age 59½ or 70½.
• Sale or purchase of a business.
• Sale or purchase of a residence
or other real estate.
• Retirement.
• Notice from IRS or other
revenue department.
• Divorce or separation.
• Self-employment.
• Charitable contributions
of property in excess of
$5,000.
