Divorce & Taxes: What to Know (Before You File)

This post is provided for educational information only. Not tax or legal advice.

Divorce and separation often complicate taxes far more than when you were married - especially in the year things change. Filing status, dependency rules, and tax credits can materially impact cash flow, yet they’re often misunderstood or addressed too late.

Below are the big-picture tax concepts that come up most often in divorce work.

1. Your marital status on December 31 matters

For federal tax purposes, your status on December 31 controls your filing options for the entire year.

• If you are legally married on 12/31, you are considered married for that tax year

• Filing options are Married Filing Jointly (MFJ) or Married Filing Separately (MFS)

• The exception is Head of Household (HOH), which has specific tests that must be met

Separation alone does not automatically change your filing status.

2. Head of Household (HOH) is valuable and often misunderstood

Filing as Head of Household can offer:

• A higher standard deduction

• More favorable tax brackets

• Access to certain credits

For reference, IRS standard deduction amounts for 2025 are:

• Single or Married Filing Separately — $15,000

• Married Filing Jointly or Qualifying Surviving Spouse — $30,000

• Head of Household — $22,500 (Source: IRS Publication 505 - https://www.irs.gov/publications/p505)

HOH is not automatic, and it’s not based on what’s written in a divorce decree. To qualify, you generally must:

• Be unmarried or “considered unmarried” under IRS rules

• Have a qualifying person live with you more than half the year

• Pay more than 50% of household costs

Only one parent can claim HOH for a child in a given tax year.

3. Claiming a child ≠ claiming every tax benefit

This is one of the most common areas of confusion.

Some benefits can be transferred between parents (often using Form 8332). Others cannot.

Examples:

• Child Tax Credit → may be transferable

• Childcare Credit → custodial parent only

• Earned Income Credit → custodial parent only

• Head of Household → never transferable

In many cases, credits and deductions are more valuable than the dependency exemption itself, which makes thoughtful planning important.

4. “50/50 custody” doesn’t always mean equal tax outcomes

Family court language and tax law don’t always align. Neither do final orders and credit agreements.

For tax purposes:

• The IRS looks at overnights, not custody labels

• There are 365 nights in a year

• One parent almost always has more

When things are truly equal, IRS tie-breaker rules apply, and those rules differ depending on whether you’re talking about dependency or filing status.

5. Why this matters during divorce

Tax decisions affect:

• Net child support outcomes

• Cash flow during separation

• Settlement negotiations

• Long-term financial stability

A final thought

Divorce isn’t just emotional - it’s financial, and as a result, it’s also a tax transition.

Filing status, credits, and deductions can materially affect cash flow at a time when stability matters most.

This overview is meant to help you understand the framework and questions to ask, not to replace individualized tax or legal advice.

If it’s helpful, I’ve created a Divorce & Taxes Quick Reference Guide that breaks down:

• Common tax credits and who can claim them

• Head of Household rules and misconceptions

• What can and cannot be transferred between parents

Download the guide for informational reference and discussion with your attorney and/or tax professional.

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Financial clarity through divorce. Freedom beyond it.