Getting Married or Divorced? Your Tax Status Will Also Change
Whether you will soon be married or divorced, both those types of life transitions are stressful and bring about quite a bit of change. One of those changes is with the Internal Revenue Service (IRS) and your tax status. The IRS considers a couple married, for tax filing purposes, until they get a final decree of divorce or separate maintenance. Here’s a look at what you need to know about your tax status when you get married or divorced.
When a taxpayer divorces or separates, both individuals must complete a new Form W-4, Employee’s Withholding Certificate to give to their employer. You also want to make sure you complete your state’s employee withholding form for your employer, as marital status also impacts state tax status.
If a divorcing couple has children, there are also tax rules related to dependent children and monetary support. Generally, the parent with custody of a child can claim them on their tax return. If parents split custody fifty-fifty and are not filing a joint return, they will have to decide who claims the child. Child support payments are never deductible by the payer and are not taxable to the payee.
Additionally, if a divorce or separation instrument provides for alimony and child support and the payer spouse pays less than the total required, the payments apply to child support first. Only the remaining amount is considered alimony. Finally, if a taxpayer transfers property to their spouse or former spouse resulting from a divorce, there is generally no recognized gain or loss on the transfer. Although you may have to report the transaction on a gift tax return.
Amounts paid to a spouse or a former spouse under a divorce or separation instrument (including a divorce decree, a separate maintenance decree, or a written separation agreement) may be considered alimony or separate maintenance payments for federal tax purposes. If you receive alimony as part of your divorce agreement, you may need to start making estimated tax payments if you receive alimony. Taxpayers can figure out if they’re withholding the correct amount with the Tax Withholding Estimator on the IRS’ website.
According to the IRS, a payment is considered alimony or separate maintenance if all the following requirements are met:
- The spouses do not file a joint return with each other
- The payment is in cash (including checks or money orders)
- The payment is to or for a spouse or a former spouse made under a divorce or separation instrument
- The spouses are not members of the same household when the payment is made (this requirement applies only if the spouses are legally separated under a decree of divorce or of separate maintenance)
- There is no liability to make the payment (in cash or property) after the death of the recipient spouse
- The payment is not treated as child support or a property settlement
- The divorce or separation agreement does not designate the payment as not includable in gross income of the payee spouse and not allowable as a deduction to the payer spouse.
Marriage and divorce are big life changes. And at the same time, they can be both scary and exciting in different ways. That being said, you don’t have to let the idea of tax changes cause you additional stress. An experienced tax attorney or tax professional will help put your mind at ease and make sure you are doing everything necessary to assure that that transition is smooth so you can focus on this new chapter of your life.
Allison Soares is a partner and tax attorney at Vanst Law LLP. It doesn’t matter the issue: audits, collections, appeals, international disclosures, grumpy people— Allison enjoys fixing problems. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving EDD audits from San Francisco to San Diego.
