Carefully Safeguarding Your Rights and Interests

Income tax considerations if you’re newly divorced

On Behalf of | Jan 6, 2023 | Divorce

If your divorce became final last year, you’ll likely have a number of changes to your 2022 income tax return compared to your 2021 return. It would probably be a good idea to have a tax professional help you with your return rather than go it alone – even with a tax filing program.

If you and your ex always shared a tax preparer, this is the time to get one of your own whom you can be confident is looking out for your interests based on your specific situation. Let’s look at just a few things to consider as you prepare to file your income tax return.

Tax filing status

As long as your divorce was final by Dec. 31, you can file as “single” or “head of household.” The latter is typically the more advantageous. However, to use that status, a dependent (for example, your child) must have resided with you for at least one day more than half of the year. Further, you must have paid over half the total cost of maintaining your home last year.

Claiming your child as a dependent

You or your ex can claim your child as a dependent, but not both of you. Often, whomever the child lives with more claims them (and head of household status).

Sometimes co-parents who share custody of two or more children will each claim at least one as a dependent. If there’s only one child, they may take turns each year claiming. Even if you have a 50-50 custody sharing agreement, you can stipulate that one of you has them for a few days or a week more than the other.

Capital gains

The IRS understands that spouses often transfer assets from one to the other during divorce. That’s why you’re typically not required to pay capital gains taxes on any transfers considered “incident to the divorce” – made as part of the divorce settlement.

If you’re still in the divorce process and working out your agreements, or you haven’t begun yet, these are things that you would be wise to discuss, negotiate and codify so that there’s no confusion when next year’s tax season rolls around. Having experienced legal guidance, along with tax guidance, can help you make the best decisions for you and your family.