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What you should know before you file your first tax return after divorce

Tax season is not something that most of us look forward to. If you’re recently separated or divorced, the whole thing may feel more confusing than ever.

Even the very first question – your filing status – may give you pause.

Determining filing status

As far as the IRS is concerned, if your divorce decree was finalized prior to Jan. 1, 2021, you’re single. If it wasn’t yet final on that date, you’re married. But there’s more to it than that.

If you and your spouse are still legally married, the two of you need to determine whether you will be “married filing separately” or “married filing jointly.” Consider these options carefully.

If you file jointly, you can still get the benefits like a higher standard deduction that come with a joint tax return. However, you may want to separate your tax obligations as early as possible and file your taxes separately, even if it means a smaller refund or having to pay additional taxes.

Can you file as “head of household,” which can get you a larger deduction. You can, but you need to meet some qualifications. For example:

  • You must file a separate tax return from your spouse or former spouse.
  • Your spouse can’t have lived with you during the last six months of 2020.
  • A dependent (typically a child or older relative) lived with you for at least six months last year.

This brings us to an important issue for many divorced parents who share custody equally.

Who claims the children as dependents?

Only one parent can claim the same child in a given year. Some parents will alternate years in which each claims their child. If you have two children, each of you may claim one of them. A child must have lived with you for a total of half the year to be considered a dependent.

If you’ve already been working with a Certified Divorce Financial Analyst (CDFA) or other tax or financial professional during your divorce, they can advise you on these and other questions. If you haven’t been, it’s important to have your own tax professional – no matter how comfortable you feel with the one you and your spouse have used. Your family law attorney can likely provide a recommendation of someone with experience handling tax returns for newly divorced taxpayers.