The income tax system in the United States is complex and constantly changing. Even tax professionals sometimes find themselves surprised by recent shifts in the rules. Your income, your employment status and even your family size can affect what taxes you have to pay.
Children and other familial dependents may decrease your tax liability, as do certain kinds of personal or household expenses. Being able to file as the head of a household can also mean that you can claim important tax credits and exemptions. What will your divorce mean for your annual tax return filing?
You become the head of your own household
The first year after the courts finalize your divorce, you may still need to file a joint return with your former spouse to maximize your tax benefits in some situations.
However, once your divorce is official, you then have the opportunity to file as the head of your own household, which means more opportunities to decrease your overall tax burden. Knowing what you can deduct and what you cannot, like spousal support, will help you get the most of your first post-divorce tax return.
Your household income may go down
When both adults in a relationship work, their combined income could push them up into a higher tax bracket than either would be in on their own. After your divorce, when only your own income affects your tax liabilities, your household income may drop by as much as half or more. That change in income could affect what tax bracket you fall into and therefore how much income tax you have to pay.
You may or may not get to claim your children as dependents
If you have minor children with your ex, claiming them on your taxes will probably play a role in your custody negotiations. Most couples will have the spouse with more parenting time claim the children.
However, in scenarios with a substantial discrepancy in income between former spouses, a family may determine that it is more beneficial to have the higher-earning parent with less custody time be the one to claim the children on their taxes.
Recognizing the multiple ways that a divorce can affect your tax liability can help as you navigate the dissolution of your marriage.