When people go through a legal separation or divorce, the change in their relationship status also affects their tax situation. The IRS considers a couple married for filing purposes until they get a final decree of divorce or separate maintenance.
When someone becomes divorced or separated, he or she usually must file a new Form W-4 with the employer to claim the proper withholding. If he or she receives alimony, he or she may have to make estimated tax payments. The Tax Withholding Estimator tool on IRS.gov can help people figure out if they are withholding the correct amount.
Amounts paid to a spouse or a former spouse under a divorce decree, a separate maintenance decree, or a written separation agreement may be alimony or separate maintenance payments for federal tax purposes. Certain alimony or separate maintenance payments are deductible by the payer spouse, and the recipient spouse must include it in income.
However, individuals cannot deduct alimony or separate maintenance payments made under a divorce or separation agreement executed after 2018 or executed before 2019 but later modified if the modification expressly states the repeal of the deduction for alimony payments applies to the modification. Alimony and separate maintenance payments received under such an agreement are not included in the income of the recipient spouse.
Generally, the parent with custody of a child can claim that child on his or her tax return. If parents split custody fifty-fifty and are not filing a joint return, they must decide which parent gets to claim the child. There are tie-breaker rules if the parents cannot agree. Child support payments are not deductible by the payer and are not taxable to the payee.
Usually, there is no recognized gain or loss on the transfer of property between spouses, or between former spouses if the transfer is because of a divorce. People may have to report the transaction on a gift tax return.
Divorcing couples who are still married as of the end of the year are treated as married for the year and must determine their filing status. The What Is My Filing Status tool on IRS.gov can help people figure out what status makes sense for their situation.
Separating or recently divorced people should consider the following statuses:
For more information, contact Wayne M. Pecht, Esquire at 717-761-4540 or [email protected].