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There are several tax benefits to filing a joint return as a married couple. When you get divorced, those benefits may go away, and you may pay higher taxes.
When you get divorced, you’ll have to pay taxes differently than when you were married; many people even see a tax increase. That’s because the IRS uses a series of tax brackets to determine how much you owe at different points in your income, and your marital status can affect which tax brackets apply.
Married people who file a joint return can earn high incomes without falling into higher brackets than individuals at similar levels of income. But when you get divorced, you’ll be filing as an individual, so you’ll lose the tax benefits of filing joint returns.
You may also end up owing taxes — or get a lower tax refund — if your tax withholding throughout the year reflected your married status when you should’ve been paying taxes at individual rates. You should update your W-4 as soon as your divorce is finalized to avoid getting an unpleasant surprise on Tax Day.
Getting divorced could also mean losing out on other tax benefits. For example, you could lose the child tax credit if you’re no longer the custodial parent. But some divorcees may qualify for head of household status, which can lower their taxes.
Read on to learn more:
When you’re married, you can file a tax return as either a married couple filing jointly or a married couple filing separately. The married-filing-jointly filing status usually lets married people pay lower taxes than if they’d filed as individuals. The married-filing-separately status, however, effectively taxes both spouses as individuals.
When you file your tax return, your filing status depends on whether you were married on the very last day of the previous year. If your divorce is finalized on December 31st, then you have to file as a single person when you do your taxes.
In order to make sure you’re paying the right amount of taxes, be sure to submit a new W-4 to your employer to update your filing status as soon as the divorce finalizes. That means your withholding will be updated so that you’re paying taxes at the correct rate for your filing status.
If you got divorced and find that you owe more in taxes, there’s a likely reason for that: you were paying married-filing-jointly tax rates during the tax year, but now owe taxes at individual rates.
For example, if you earned $100,000 and your ex-spouse earned $50,000, your combined income would have a marginal tax rate of 22% if you paid married-filing-jointly rates. But if your filing status changes to individual, then your $100,000 has a marginal tax rate of 24%.
But if you continued paying the lower tax rate even after the divorce finalized, you’ll have to make up the difference by paying the higher tax rate when you file your return as a single person.
(Note that if you and your spouse filed separately while married, you may not notice a difference in your tax rate.)
This higher tax bill can come as a shock to many recent divorcees. However, failing to file on time can cost you a lot of extra money in interest and fees, as can making a late payment. Instead, file your tax return as normal, and make as large a payment as you can.
The IRS is typically understanding of your situation and may be able to set up a payment installment agreement for you to pay off the rest.
Read more about what happens if you file your taxes late.
Numerous changes happen to your taxes after a divorce. Not only will you have different marginal tax rates; you’ll also potentially lose some credits and deductions, depending on the terms of your divorce decree.
Going from a married tax-filing status to a single tax-filing status often entails paying different tax rates than when you were married.
If you earned more than your spouse and filed joint returns, you may pay higher tax rates after your divorce, since more of your income falls into higher brackets. But if you earned less than your spouse, your individual income may put you back into a lower tax bracket.
Additionally, you may qualify for head-of-household status after your divorce if you receive custody of your children. Heads of household are unmarried taxpayers who pay more than half the cost to maintain their home and care for a qualifying dependent who lives with them for more than half the year.
Generally, heads of household enjoy lower marginal tax rates than people with single-filer status, but slightly higher marginal tax rates than people with married-filing-jointly status. Only the ex-spouse who provides at least 51% of the dependent’s care can claim this status.
There are tax credits you can claim for caring for certain qualifying dependents. Who qualifies as a dependent depends on who they are and how much care you provide for them. Often, the dependent is your minor child, but other types of people may qualify.
Read more about claiming a dependent on your tax return here.
The types of tax credits are available for having a dependent include:
Whether you or your ex-spouse can claim any of these credits depends on several factors, but it’s largely based on who has custody. However, the custodial parent can allow the noncustodial parent to claim these credits by signing a written declaration, as long as the other qualifications for living situation and support are met.
If you just got divorced, you might have to pay higher taxes. According to your divorce decree, you might also have to pay alimony and child support. Because of all these additional costs, you might be hoping you can claim a deduction or exemption for your child support and alimony payments.
Unfortunately, there are no tax benefits to claim for paying child support. Child support payments are also not taxable by the recipient.
However, if you got divorced in 2018 or before, you may be able to claim a tax deduction for paying alimony, as long as the alimony payment meets the requirements of the IRS. Alimony is a deduction you take on Schedule 1 of your tax return, meaning that you can claim the alimony deduction even if you don’t itemize your deductions.
However, the Tax Cuts and Jobs Act of 2017 removed the alimony deduction for divorces executed on or after January 1, 2019. You’ll be able to continue claiming the alimony deduction if your divorce finalized before that date.
If you have unpaid taxes when you die, your spouse may have to pay them out of pocket.
Life insurance can help pay off your unpaid taxes instead.
If you and your spouse plan to divorce, you must still file as a married couple as long as you were married for every day of the tax year you’re filing for. Choosing to file a joint return can save both of you money on your taxes.
However, if you’re not on good terms, you can use the married-filing-separately filing status, which means both taxpayers file their own return and pay basically the same tax rates as a single person.
For the purpose of deciding your filing status, the IRS considers you unmarried only if have one of the following:
Additionally, if you can file as married-filing-separately, you may actually be able to file as head of household instead, as long as you meet the following qualifications:
You’ll also have to determine which deductions each of you can take, because some deductions can only be claimed once per tax return.
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