Filing Taxes After Divorce: What You Need to Know

March 1, 2025

Divorce can be a complicated process, and one of the areas where it often impacts your life is your taxes. Whether you’ve finalized a divorce, annulment, or legal separation, understanding how your new status affects your tax obligations is crucial. Being informed about your divorce decree and how it ties into tax regulations can make a big difference. Let’s walk through the key considerations for filing taxes after a divorce.

Determining Your Filing Status

One of the first questions to address is your filing status. If your divorce was finalized by the end of the tax year, you can no longer file a joint return with your ex-spouse. However, you don’t automatically default to filing as a single taxpayer. Here are some exceptions:

• Head of Household: You may qualify for this status if you’ve provided a home for a qualifying child, which often results in a lower tax liability.

• Remarriage: If you remarry before the end of the year, you can file jointly with your new spouse.

Filing status can have a significant impact on your taxes, so it’s worth exploring all applicable options carefully.

 

Health Insurance and Tax Implications

Divorce can also affect health insurance payments, particularly if you purchased coverage through a state or federal marketplace and received advance premium tax credits. You’ll need to notify the marketplace of changes in your family structure, such as divorce, marriage, or job changes. These updates can influence your monthly payments and help prevent surprises when reconciling your credits during tax filing.

 

Understanding Alimony and Taxes

The tax treatment of alimony depends on the timing of your divorce or separation agreement:

• Agreements Executed After December 31, 2018: Alimony payments are not tax-deductible for the payer or taxable for the recipient under the Tax Cuts and Jobs Act (TCJA).

• Agreements Executed Before January 1, 2019: Alimony is deductible for the payer and taxable for the recipient unless modifications specifically adopt the new TCJA rules.

 

To qualify as alimony for tax purposes, payments must meet specific requirements:

• Payments must be in cash.
• The divorce agreement must not specify that the payments are not alimony.
• The spouses cannot file a joint return or live in the same household at the time of payment.
• There must be no obligation for payments to continue after the recipient’s death.
• Payments cannot be designated as child support.
• Both parties should have the terms clearly outlined in the divorce agreement to avoid confusion and ensure compliance with tax laws.

 

Child Support and Tax Benefits

Unlike alimony, child support payments are neither deductible by the payer nor taxable for the recipient. Determining which parent can claim the child for tax purposes usually depends on custody arrangements:

• Custodial Parent: The parent with whom the child lives for the majority of the year typically claims the child as a dependent and qualifies for tax benefits like the Earned Income Credit (EIC) or the Child and Dependent Care Credit.
• Noncustodial Parent: With the custodial parent’s consent via Form 8332, the noncustodial parent may claim the child tax credit but cannot claim head of household status or other benefits tied to custodial status.

 

Retirement Plans and Qualified Domestic Relations Orders (QDROs)

Divorce can also impact your retirement accounts. A QDRO is a legal order that specifies how retirement benefits are divided. It applies to:

• IRAs
• Employer-provided retirement plans
• To avoid unintended tax consequences, ensure that your QDRO complies with IRS requirements. This order can direct funds to your child, spouse, former spouse, or dependent without triggering early withdrawal penalties.

If you’re navigating the complexities of taxes after divorce, including alimony, child support, or filing status, we’re here to help. Contact us for personalized guidance tailored to your unique situation.

Image by Jovan Vasiljević