Filling out income tax forms isn't high on many people's lists of favorite things to do. It's often complicated, and you're almost always wondering if you're doing it right. It can be even worse for divorced or separated taxpayers.
A divorce is stressful enough. Knowing how to handle your taxes can make tax time less stressful, and maybe even more profitable. It all starts with knowing the correct filing status to use. There are four possibilities:
single
head of household
married, filing jointly, or
married, filing separately.
Are You Divorced for Tax Purposes?
The first question to answer is whether you are divorced for tax purposes. Keep in mind:
for federal tax purposes, a marriage means a legal union between a man and a woman and a legally married same-sex couple,
state law controls whether you're married or legally separated under a divorce or separate maintenance decree.
There are some special rules for figuring out your marital status:
you're not married if you're single by the end of the year
you're not married if at the end of the year you're legally separated under a final decree of divorce or separate maintenance
you are married if at the end of the year you are separated under a provisional divorce decree that has not been finalized
you are married if at the end of the year you are living apart from your spouse
you're not married if at any time during the year your spouse is a nonresident alien and you don't file a joint return reporting your worldwide income
you are married if you're a surviving spouse--that is, your spouse died during the tax year (but you're unmarried if your spouse died the previous tax year).
Single Filing Status
If you're unmarried at the end of the year and don't have a child or other dependent, you must file as single. However, if you have a child, you could qualify for head of household status.
Head of Household Filing Status
Divorced or separated taxpayers who qualify should file as a head of household instead of single because this status has several advantages:
there's a lower effective tax rate than the one used for those who file as single
for separated but still married taxpayers, head of household protects you from joint tax liability resulting from the other spouse's errors
the standard deduction is higher than for single individuals
a taxpayer who is still married and filing as a head of household may claim the standard deduction even if the other spouse itemizes deductions.
Qualifying as a "Head of Household"
To qualify as head of household, you must be unmarried and not a surviving spouse. Also, you must pay more than half the cost of maintaining your home, and it must be the primary home of at least one of the following people for more than half the year:
a qualifying child, or
someone else who qualifies as your dependent.
A qualifying child is:
related to you—your son, daughter, stepchild, adopted child, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew)
under age 19 (or a student under 24)—the child must be under age 19 at the end of the tax year, or under age 24 if a full-time student for at least five months of the year, or any age if permanently and totally disabled at any time during the year
not self-supporting—did not pay for over half of his or her own support during the year
lives with you—either for more than half of the year or falls within special rules for children of parents who are divorced, separated, or living apart (temporary absences for things like schooling, medical treatment, vacations, business, or military service don’t count)
U.S. citizen or resident—a U.S. citizen, U.S. national, or resident of the United States, Canada, or Mexico for some part of the year.
You may also claim head of household status if a parent or other close relative who doesn't live with you qualifies as your dependent. You must pay for over half the relative's support and he or she must have little or no income. For example, your parent lives in a retirement home and you pay the bills.
Tip: It may not be clear who had custody for more than half the year and is able to file as a head of household when parents have joint physical custody of their child. The parents should agree between themselves how to handle this issue. A daily log of exactly where the child lives during the year should be kept, as well as a record of household expenses and who paid them.
Special Rule for "Abandoned Spouses"
You may be able to file as a head of household under the abandoned spouse rule if you're separated but still married. You're considered unmarried if:
you have at least one child
you run a household and your child lives with you for at least half the year
you file a separate return
your child qualified as your dependent for the year (or you could claim your child as a dependent but signed a release of the dependency exemption)
you pay at least half the cost of maintaining the household for the year, and
during the last six months of the year, your spouse wasn't a member of the household.
Married Filing Jointly
If you're separated but still married and don't qualify for head of household status, a joint return may be filed.
Some Advantages and Disadvantages of Filing a Joint Return
it's cheaper to pay a tax professional to prepare one joint return rather than two separate returns
if you or your spouse receive Social Security benefits, a smaller portion is subject to taxation if you file jointly than if you file separately.
The main disadvantages to filing a joint return are:
you can't claim a deduction for alimony or separate maintenance (spousal support); the alimony deduction is available only for couples who divorce in 2018 or earlier
each spouse is jointly liable for all taxes owed, so each spouse can be liable for the other spouse's errors and omissions in filing tax returns
joint filers are limited to a single $10,000 deduction for state and local taxes; by filing separately, each spouse can claim a $10,000 deduction
any tax refund can be withheld to pay a spouse's financial obligations, such as unpaid student loans.
Married Filing Separately
Taxpayers who are married may always choose to file separate returns. The main disadvantage is loss of valuable tax credits. The main advantage is you won't be liable for your spouse's taxes. The tax rates spouses pay on their income are usually the same whether they file jointly or singly. However, married taxpayers in the top bracket who file singly pay tax at a 2% lower rate on the first $400,000 they make over about $600,000 in taxable income--a maximum $8,000 marriage penalty.
Also, if separate returns are filed, both spouses must itemize deductions, or each spouse must claim the standard deduction. It's not permitted for one spouse to itemize and for the other to claim the standard deduction.
Tip: Often, parties can't agree on whether to file a joint return. Each spouse should file a timely separate return if this happens. You may later elect to file a joint return after separate returns have been filed, generally within three years of the due date of the return. In contrast, you can't amend a joint return by filing separate returns later on.
The filing status you use can save you money, or cost you money in the form of lost deductions and credits. It's worth taking some time to think about which status is best for you.
The IRS has an online tool you can use to help determine your filing status. For more on tax filing status after divorce, see IRS Publication 501, Dependents, Standard Deduction and Filing Information. If you're still unsure, it's a good idea to talk to a tax attorney or another tax professional to make sure you choose the correct filing status.
