A divorce is a significant event affecting almost all aspects of life. In preparing for divorce, you are probably concerned about the effects on your children, personal property and other assets.
Though you may have other priorities, you need to consider the tax consequences of divorce. After your divorce, you will have to change how you file with the IRS.
Change in filing status
During your marriage, you should have filed your taxes jointly with your spouse or as married filing separately. After your divorce, your filing status will either be single or head of household. The IRS considers you no longer married for a tax year if you have a final divorce decree by December 31 of that year. Whether you file as single or head of household depends on if you paid for over half your household expenses and had a qualifying person, such as a child who lives with you.
Claiming tax credits for a child
By default, the custodial parent has the right to claim a child as their dependent and qualifies for taking the Child Tax Credit on their tax return. However, the custodial parent can agree to allow the non-custodial parent to claim the child. The custodial parent must sign Form 8332 or another written declaration to make their intention known.
When you get divorced, you should know what to expect when filing with the IRS the following year. Understanding the tax implications is an essential part of making financial preparations for the next phase of your life.