What Tax Filing Status Should I Use During My Divorce?

 Posted on May 12, 2021 in Taxation Law

Ending your marriage can be a difficult decision, but if you have decided that it is the best choice for you and your family, you will want to make sure you are taking the right steps to begin the next phase of your life on secure financial footing. In addition to addressing matters related to your property, income, and family finances, you will also need to look at your taxes. A variety of divorce-related tax issues may arise, and one of the most important is determining what filing status to use when filing your annual tax returns.

Options for Filing Status for Divorcing Spouses

For the year when your final divorce decree was or will be issued, you will not be able to file taxes jointly with your spouse. That is, if you will be finalizing your divorce in 2021, you and your ex will each be required to file separate 2021 tax returns before the April 15th deadline in 2022. However if you are still legally married on December 31, 2021, you can still file a joint tax return for 2021. 

When choosing a filing status, you generally have three options:

• Married filing jointly - Filing taxes together with your spouse can sometimes be a good option, even if you are separated. If you will be receiving a tax refund, you will need to decide how this amount will be divided between the two of you. If you will owe any taxes, you will be jointly responsible for paying this amount. If the IRS conducts a tax audit of your joint return, it can hold either spouse or both spouses liable for any taxes that are due, as well as interest and penalties.
• Married filing separately - You and your spouse may choose to file your own individual tax returns. On your tax return, you will only list your own income, deductions, and credits. In these cases, any refund you receive will go solely to you, and you will only be responsible for paying the individual taxes you owe and any penalties or interest that may apply. However, the tax rate in these cases is generally higher than for spouses who file jointly, and if one spouse itemizes deductions on their tax return, the other spouse will also be required to do so rather than taking the standard deduction.
• Head of household - When filing separately, either or both spouses may be eligible to use this status, which will provide some advantages, including a lower tax rate, the ability to claim the standard deduction even if the other spouse itemizes deductions, a higher standard deduction, and the ability to claim certain tax credits. You may be eligible to file as head of household if you lived in a separate home from your spouse during the second 6 months of the tax year in question, you paid more than half of the costs to keep up your home during the year, and at least one child that you can claim as a dependent lived with you for more than half of the year.

Contact Our San Jose Tax Lawyer

If you have questions about the most beneficial filing status to use when filing a tax return during your divorce, or if you are facing a tax audit either during or after your divorce, John D. Teter Law Offices can help. Contact our San Jose, CA tax attorney today at 408-866-1810.

Sources:

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