A Family Law Attorney Answers Divorced Parents’ FAQs About Taxes

If you're a newly divorced parent, taxes could be the last thing on your mind — even when the little voice in the back of your head keeps reminding you it's time to file. But like death, taxes are the only thing guaranteed in this life, so, unfortunately, we have to deal with them. It's safe to say many recently divorced or separated parents are scrambling to determine who can claim their children as dependents this year and what credits are available. In fact, many questions might come up as you wade through your numerous documents.

Without any guidance, things can get pretty tricky when it comes to dividing mutual assets and navigating tax credits to ensure you're getting the benefits and deductions you're entitled to receive. These are all reasons you might consider consulting with a pro, especially if you're newly divorced.

"Unless you are an attorney who focuses on tax matters or a CPA, you may not know what you don't know," David DuFault, a family law attorney and principal at Sodoma Law, explains. "The assistance of professionals who regularly practice in these areas can be exceptionally beneficial in terms of saving taxes or maximizing refunds. Professionals can also help identify innocent mistakes that could lead to more taxes owed, penalties, and additional costs imposed by the taxing authority."

Many of us are looking to maximize tax savings at the best of times, and as someone who's newly divorced, traversing the ins and outs of your tax situation can be confusing and overwhelming (and, let's be honest, boring). According to DuFault, here's what you need to know about taxes and divorce.

Why does the IRS need to know about my divorce anyway?

The IRS needs to know if a divorce has occurred or is pending because ownership of property, shared business, and other assets may change. Plus, only one spouse may claim any minor children on their taxes.

"When married couples separate or divorce, their shared assets (and in some cases liabilities) will still be reported on the tax return," DuFault explains. "The shortest answer is that the IRS wants to be sure that both parties aren't attempting to deduct the same mortgage interest or claim the same dependent care expenses or child tax credits, i.e., no double-dipping."

And since our tax system is still based on the "honor" system, DuFault points out that it's the responsibility of each taxpayer to report on the income tax return the appropriate tax information, including whether the taxpayer is single, married (filing jointly or separately), or qualifies as head of household.

How soon should you tell the IRS that you are divorced and why?

The IRS does not require notification other than what you report on your income tax return. "But someone who has been divorced must file as single on their yearly taxes, regardless of when in the calendar year the divorce was finalized, unless that person is either filing as head of household or has remarried," DuFault explains.

The date of the separation agreement or divorce has very little to do with taxes and receiving/paying alimony unless the parties are subject to an older or pre-existing agreement. In prior years (pre-2018, based on my research), alimony was a deductible "expense" to the party paying it, which then made the same payment includable as "income" for the recipient.

The date of the separation agreement and/or divorce decree does have some bearing on the classification of the taxpayer as either married filing jointly, head of household, or single. Those classifications and which kind of tax filing might even be discussed in the agreement.

What happens if you have children?

DuFault says only one divorced parent may claim any minor children on their taxes. So, which parent should do so? Typically, says DuFault, it's the custodial parent, determined as the parent with whom the child lives for the greatest number of nights for that tax year. Or, if the number is even, it's the parent with the higher income.

An interesting note: DuFault says each parent can claim different children as long as the IRS agrees these standards have been met for each child.

What are the taxable divorce expenses?

Although divorces can be costly, DuFault explains that, unfortunately, the costs of divorce are not deductible to either party. "Attorney's fees, court costs, etc. cannot be deducted," he shares. Alimony may be deductible if it is being paid pursuant to an agreement executed prior to 2019. Alimony agreed upon pursuant to agreements executed after 2018 is no longer deductible by the payor or reported as income by the payee."

In terms of what happens to shared assets after a divorce, DuFault says the distribution of shared assets depends on the laws of a given state and the divorce agreement reached by the couple. So, it would be best to consult with your attorney if you have any questions about yours.

DuFault adds that those who have not regularly been involved in their tax filings, i.e., those whose spouse handled it or who find themselves in a tax situation where only one income is involved, will benefit from professional tax assistance to avoid leaving certain tax breaks on the table.

"Professional advice may more than pay for itself if tax credits are available that the individual wouldn't otherwise be aware of," he says.