April 15, 2019, will bring in further changes to income tax filings for separated and divorced couples after the passage of the Tax Cuts and Jobs Act (TCJA). Indeed, there will be changes for the vast majority of Americans, but here we will only address some specific issues related to divorced and separated couples. If you have questions about your tax liability after a divorce or separation, find the answers you need below.
Your filing status depends on the legal status of your marriage as of December 31st. If you were married for 364 days of the year and divorced on the last day, you count as not married. Under California law, a legal separation agreement also counts as no longer being married for tax purposes.
Single or Head of Household
Select single filing status if your divorce was finalized or you have a legal separation agreement in place by December 31st. If you have dependent children who reside in your home, you may be eligible to claim head of household status instead of single to lower your tax burden.
Married Filing Jointly or Separately
If you remained married and had no separation agreement, you must file as married. You can either file jointly (together on one return) or separately (two separate returns) based on what results in the lowest taxes. Joint or separate only refers to whether you file together not the status of your marriage.
To file a joint return, both spouses must agree to do so and sign the same return. As a general rule, the IRS will hold both spouses jointly and individually liable for paying a joint return, but you can make any tax debts part of your divorce agreement enforceable in divorce court.
Child Tax Credits (Formerly Dependent Exemptions)
Beginning with 2018 taxes filed in April 2019, there are no more exemptions for dependent children. Instead, there are now increased Child Tax Credits.
Generally, the rules for claiming the expanded credits are the same as they were for exemptions. The person who the child lives with for the majority of the year can claim the credit unless they agreed to something else in their divorce agreement.
If you were divorced prior to the tax law changes and had an agreement regarding exemptions, it probably carries over to the expanded tax credits, but you should check your divorce agreement to be sure.
The tax rules for child support did not change in 2018. Child support payments are not deductible for the parent who pays, nor are they taxable to the parent receiving them. Again, this represents no change from the previous income tax rules relating to child support payments.
There are some big changes for alimony as it relates to new divorces, those marital dissolutions finalized in 2019 and beyond:
- For divorces finalized on or before December 31, 2018, the spouse paying alimony can deduct it on their tax return, and the spouse receiving alimony includes it in their taxable income. This will continue for the duration of the alimony payments unless you go to court to modify your alimony agreement to use the new tax law.
- For divorces finalized on or after January 1, 2019, alimony is ignored for tax purposes. The spouse paying alimony doesn’t receive a deduction, and the spouse receiving alimony doesn’t pay taxes on it.
Note that new alimony awards will likely decrease slightly to account for the fact that the paying spouse will now be covering taxes and the receiving spouse will be receiving tax-free money.
Divorce costs never were and are not now deductible as a general rule. However, there was a loophole where you could deduct the costs of receiving alimony as a cost of generating taxable income. The new tax law eliminates this deduction.
Talk With a Divorce Attorney
To understand how these tax law changes may impact your previous divorce agreement, whether you need to modify your divorce agreement, or how to account for these changes in your planned divorce, schedule a consultation with one of our divorce attorneys today.