Taxes after a divorce are complicated.
If you’ve recently separated or gotten a divorce, you’re probably not thinking about taxes. But this tax season will be different than others. From deductions to recognition, dependants, status, and more; preparing early is essential.
That’s why we’re here to help by gathering our top tips for dealing with taxes after a divorce.
Recognition
According to the IRS, you’re still married if you’re not legally separated or divorced as of December 31st (of the given tax year.). So, even if you filed during the year, and are separated or living apart, it won’t be recognized as a ‘divorce’ until its final. Therefore, you’re still ‘married’ in the eyes of the IRS.
Filing Status
The filing status depends on whether or not your divorce is complete. If it was finalized before December 31st, then you can file separately. But, if it was not, you must file together. In this case, if you don’t want to file jointly, but are still technically married, you can choose the ‘married but filing separately’ status.
If you’re still married according to the IRS, filing together does have benefits. That’s because you get a higher standard deduction by combining income which will lower what you owe in taxes. As of 2021, this amount was $25,100 for married people vs. $12,400 for individuals filing separately.
Dependants
Only one parent can claim a particular child on their tax return. But, if there are multiple children they can be split up between spouses.
But, if you and your spouse can’t agree on who will claim a dependant (or if there is an odd number), you will have to use the custody ratio tiebreaker. According to this rule, the person who had custody for the greater part of the year will be the one who gets to claim them.
When custody is split an even 50/50, the parent with the higher adjusted gross income will get to claim the child.
So, if you’re currently dealing with a separation or divorce and are unsure of who will get to claim the kids, speak with a tax professional or attorney. Otherwise, attempting to claim the same dependent can result in a rejection of one or both claims.
Head of Household
For those who cannot file a joint return, you may be able to file as head of household. This status offers a larger standard deduction ($18,800 in 2021). In this case, only one spouse is able to claim themselves as the head of household.
Further, you will only be able to claim this status if you are legally deemed unmarried by the last day of the year (December 31st), paid more than half the cost of the home for the year (with things such as real-estate tax, utilities, food, home insurance, etc.) and you lived with a qualifying dependant.
W-4 Forms
The W-4 form is used to tell your employer how much deduct from your paycheck. Once divorced, you may need to update the amount. That’s because joint filers need to split their W-4 withholding so you may need to recalculate the amount.
If you’re unsure what an accurate deduction is, it’s best to speak with a financial professional (like us at A.P Accounting and Tax Services). We will carefully analyze your situation, accounts, exemptions and more to ensure the amount is correct.
We also understand that this can be a difficult time in your life, which is why we’re here to help. Our trained staff will carefully walk you through the changes to ensure a successful tax season.
So, if you’d be interested in learning more, or knowing what services would benefit you, give us a call at 407-328-5001.
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