Tuesday, 10 March 2015 14:49

Tax Tips for Separated or Divorced Tax Filers

If you are separated or divorced there may be tax implications related to your new relationship status.  At Hess Family Law we can work with your existing tax preparer, or we can refer you to and work together with a new tax preparer to assist with separate and divorce tax implications. 

Efile.com suggests these tips for you to consider when filing your annual taxes.

Filing Status:

Your marital status as of December 31st of each year controls your filing status for that year.   If you were still married on December 31, 2014, and you do not have an Agreement that specifies how you will file, you have two options:  file a joint return or file married filing separately. If you were divorced during 2014, you cannot file a joint return.  If you do not have an Agreement that addresses who may file as Head of Household, you can file as Head of House of Household (and get the benefit of a bigger standard deduction and more advantageous tax brackets) if you had a dependent living with you for more than half the year and you paid for more than half of the upkeep for your home. Otherwise, you may need to file as a Single tax payer.  Hess Family Law recommends you consult an accountant to determine the best way for you to file your taxes.

Dependent Exemptions:

Who claims the kids?  If you have an Agreement or Court order stating who claims the kids then the matter is resolved.  If you do not have such a document and you are the custodial parent you may claim your children as dependents for tax purposes.  The IRS considers you a custodial parent if your child lived with you for a longer period of time during the year than with your former spouse.  Regardless of your custodial arrangement, you and your ex-spouse can agree who claims the children as dependents.   In this instance the custodial parent must sign a waiver stating that he/she will not claim the deduction. 

Tax Credits:

If you're the parent who claims the dependent exemption, you're also the one who can claim the child credit and the American Opportunity higher education credit or the Lifetime Learning higher education tax credit.  If you can't claim the exemption, you can't claim these credits, even if you pay the education expenses.  Only the custodial parent may claim the work related childcare credit, even if the noncustodial spouse takes the dependency exemption.  

Child Support:

Regardless of who pays and who receives child support, child support is always tax neutral.  


Alimony is taxable to the recipient and deductible by the payer, unless your Agreement or Court Order states otherwise.  For the payments to be qualified as alimony, the alimony must be written out in an agreement, or as part of a court order or judgment. 

Medical Expenses:

If you continue to pay your children’s medical expenses you may claim these expenses as a deduction regardless of whether you are considered the custodial parent and/or whether you are taking the dependency exemption.  

Transfer of Assets:

If your divorce Agreement or Court Order transfers property from one spouse to the other, the recipient does not have to pay tax on the transfer.   However, the property’s tax basis shifts and when the property is later sold, the recipient spouse will pay capital gains on the appreciation before, as well as after, the transfer. 

Sale of the Marital Home:

When the marital home is sold, you may incur a capital gains tax.  Single tax payers can usually avoid the tax on the first $250,000 of gain on the sale of their primary home if they have owned the home and lived there at least two out of the last five years.   Married couples filing jointly can exclude up to $500,000 of gain as long as one of they has owned the home and both have used it as a primary home for at least two of the last five years.    If the home is sold after divorce, and the two-year ownership and use tests are met, each spouse can exclude up to $250,000 in gain on their individual returns.   Sales after divorce may also qualify for a reduced exclusion if the two-year test is not met.   If one spouse receives the house as part of the divorce settlement, and the house is sold later, that spouse can only exclude up to $250,000 of gain. 

Retirement Assets:

How you handle your retirement assets during divorce can have big tax implications.   For example, if you cash out a 401(K) plan to provide your former spouse with funds, you will be required to pay tax and possibly penalties on that withdrawal.  However, if funds from the retirement asset are transferred pursuant to a Qualified Domestic Relations Order (QDRO), you will not have any tax implications at the time of the transfer.   While you do not need a QDRO to transfer an IRA, it does have to be transferred pursuant to a written Agreement to avoid the transfer from being treated as a taxable distribution. 




Last modified on Friday, 02 October 2015 19:54

Mailing Address

Geraldine Welikson Hess, Esq
Hess Family Law
451 Hungerford Dr,
Suite 119-307
Rockville, Maryland 20850

Geraldine Welikson Hess, Esq
Hess Family Law
344 Maple Ave West,
Suite 355
Vienna, Virginia 22180

Meeting Locations

Rockville, Maryland:
1 Research Court,
Suite 450
Rockville, Maryland 20850
(240) 389-4377
Get Directions arrow2

Fairfax, Virginia:
11325 Random Hills Rd,
Suite 360
Fairfax, Virginia 22030
(240) 389-4377
Get Directions arrow2

Honored among the best divorce and family lawyers in Montgomery County and Maryland by:  Best Lawyers  and

ha-cda-hessha-aaml-hessha-sl-hessha avvo hess 9.5