Divorce has wide-ranging tax consequences from filing status to dependency claims. Planning ahead can minimize the financial impact.

Divorce Tax Planning

Filing Status in the Year of Divorce

Your marital status on December 31 determines your filing status for the whole year.

Divorced by 12/31: File as Single or Head of Household
Still married on 12/31: File Married (jointly or separately)

Using Head of Household Post-Divorce

If you paid more than half the household costs and a qualifying child lived with you more than half the year, file as Head of Household for a better rate than Single.

Claiming Children as Dependents

Only one parent can claim each child per year
Custodial parent typically gets: dependency exemption, Child Tax Credit, EITC, Head of Household status, education credits, dependent care credit
Custodial parent can release the dependency exemption to non-custodial parent via Form 8332

Alimony (Post-2018 Divorces)

No tax deduction for payer
No taxable income for recipient

Property Transfers Between Spouses

Generally not taxable at the time of transfer, but the receiving spouse takes the transferor's cost basis.

Updating Your W-4

After divorce, update your W-4 to reflect your new filing status and adjust withholding.

QDRO for Retirement Accounts

A court-ordered QDRO transfers part of a retirement account to an ex-spouse without taxes or penalties.

Going through a divorce? Tax planning during this process can protect your financial future.

The Tax Implications of Getting a Divorce