Tax Issues That May Affect Married Couples Who Are Separated

 Posted on July 21, 2021 in Taxation Law

When a couple chooses to end their marriage, they will need to address a wide variety of financial matters, and they will need to make decisions about how to handle multiple types of divorce-related tax issues. However, there are many situations where couples separate before getting divorced, either as a trial to determine whether to move forward with ending their marriage or in preparation for their final split once the divorce process is complete. 

When a couple is living separately while they are still legally married, they will need to address certain types of unique tax issues. The decisions they make during this time may be based on how they expect to handle matters during their divorce, or they may need to take temporary measures to ensure that both parties’ financial needs are addressed properly. It is important for spouses to understand their rights and options when addressing these matters, since decisions that may be beneficial for one spouse may lead to financial difficulties for the other.

Tax-Related Matters to Address During a Separation

Couples who file tax returns while separated will need to determine whether they will file jointly or separately. While filing a joint tax return may provide some benefits, such as a lower tax rate and the ability to claim certain credits, spouses should be aware that they will both be liable for any taxes that are owed, as well as any tax debts or penalties uncovered during a subsequent IRS audit. 

If a couple does not file a joint tax return, they will usually need to file under the status of married filing separately. However if a couple has been separated for at least 6 months, either spouse may file as head of household if they have a child or another dependent who lived with them for more than half of the year and if they paid at least half of the expenses for maintaining their residence.

When filing separately, spouses may either elect to claim the standard deduction, or they may itemize deductions. However, both spouses must make the same election. Spouses should also be aware of the types of deductions and credits that they can claim. Only one parent can claim a child as a dependent, and this will usually be the parent that the child lives with most of the time. 

If spouses own a home together, they may both be able to claim deductions for mortgage interest and property taxes, although they will only be able to claim the amounts that they each paid. If spouses have equally divided the costs of mortgage payments and property taxes, they will each be able to claim 50% of the total deductions for these amounts. However if one spouse is living in the home and paying the majority of the mortgage payments and/or property taxes, the other spouse will only be able to claim deductions for the portion of the mortgage interest and property taxes that they have actually paid.

Contact Our San Jose Tax Attorney

Whether you are planning to get divorced or have lived separately from your spouse, you will need to understand how to address tax issues in a way that protects your financial interests. At John D. Teter Law Offices, our San Jose, CA tax law attorney can review your situation and advise you of your rights while helping you make decisions that will allow you to move forward successfully during the divorce process and beyond. Contact our office today at 408-866-1810 to set up a confidential consultation.

Sources:

https://www.irs.gov/publications/p504

https://turbotax.intuit.com/tax-tips/marriage/tax-tips-for-separated-couples/L6H4vr1nd

https://www.thebalance.com/what-divorced-or-separated-means-for-taxes-4125740