First, your filing status will change. If you divorced on any date in 2015, you are treated by the IRS as if you had been single the entire year. So your filing status will be single. Will my taxes go up or down as a result? It depends. If your joint income while married kicked you into a higher tax bracket, filing individually will reduce your taxes.
Second, if you have children, you might save or pay more. If you can claim the head of household status, you can dramatically reduce your tax rate. But to claim head of household the children must be with you for more than half of the year. Also, you can claim the children as dependents and also qualify for the childcare tax credit. So, generally, the custodial parent gets a tax boon filing singly, while the noncustodial parent takes a bit of a tax hit.
Third, if you pay or receive maintenance, be aware that maintenance qualifies as income for those who receive it and a tax break for those who pay it. If you happen to pay a high rate of maintenance, you could have a significant tax offset. On the other hand, if you receive a good deal of maintenance, you will be in a much higher tax bracket than you originally imagined.
Fourth, if you pay child support, you cannot deduct it or otherwise get a tax break. While it might make sense to offer a deduction, if only as an incentive for obligors to pay support, Congress has not amended the tax code for this interpretation. And if you receive child support, it does not qualify as income.
Fifth, if you sell the marital residence, you can qualify for up to $250,000 tax exclusion benefit as a single filer, but you must sell quickly because of time restrictions.
Finally, if you have retirement accounts that were awarded to you from the divorce and you do not roll them over into your existing retirement account or a new retirement account within six months, you will have to treat that award as income or even a capital gain.
As you can see, divorce has serious implications for your tax status.
If you have questions about divorce and tax status, contact us – we can help.