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How to File Taxes for Divorcing Couples

Updated for Tax Year 2016


OVERVIEW

If you decide to file separately until your divorce becomes final, you can only claim dependent exemptions for your children if they live with you for more than half of the tax year. Watch this video to find out more about how your divorce may affect your taxes. 


If you are in the process of divorcing your spouse, you may be interested to learn about how your tax return will change once you are no longer eligible to file a joint return.

The IRS treats you as married if on the last day of the tax year you still don't have a final divorce decree or separation agreement. This means you can only choose between the married filing jointly and married filing separately statuses.

If you and your spouse lived apart for the last six months of the year, you may be able to file as head of household when still married. Using the head of household status may save you more in tax than the married filing separately status due to the larger standard deduction you can take and the more favorable tax brackets, but there are a number of conditions you must satisfy in order to use it and only you or your spouse (not both) may do so.

In the year your divorce becomes final, your filing options will change. At this point, you are no longer married and must choose between single and head of household. Again, only one person, you or your ex, can file as head of household.

If you decide to file separately until your divorce becomes final, you can only claim dependent exemptions for your children if they live with you for more than half of the tax year. In the event you still live with your spouse, the IRS allows the parent with the higher adjusted gross income to claim the exemptions.

Once your divorce is final and you no longer share a home with your former spouse, you generally must have custody of any child you claim as a dependent. If your former spouse has custody but agrees to let you claim the exemptions, you may do so, but only if the agreement is in writing. Use Form 8223 for this and be sure to include it with your tax return.

Another important issue to consider is your payment or receipt of alimony. The spouse who receives alimony must report it as taxable income, whereas the paying spouse can deduct it.

One last thing to consider for the tax returns you file before your divorce is final is that even though filing a joint return will likely save you more in income tax, you are responsible for all tax on the return; the IRS will not allocate the tax debt based on the earnings of each spouse. So if your spouse decides not to pay taxes,  you are liable for the amount.

Remember, when you use TurboTax to file your tax return, we’ll ask you simple questions and recommend the best filing status for you.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


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