Divorce and Taxes: What Every Divorced Couple Must Know

Estimated Reading Time: 5-6  Minutes

Seasons Change, So Do Finances: What Every Divorced Couple Needs to Know About Taxes.

Life moves forward, and so do your finances—especially after a divorce. While separation may bring emotional and legal closure, tax season often reopens financial discussions. Even if communication with your ex is limited, understanding key tax considerations can help you avoid penalties, maximize deductions, and reduce stress.

Filing Status in Florida: What Changes After Divorce?

Your filing status depends on your marital status on December 31 of the tax year. If your divorce was finalized before the new year, you’ll file as Single or Head of Household (if eligible). Head of Household status offers better tax rates and a higher standard deduction, but you must have a dependent and provide most of their financial support.

If you were still legally married on December 31, you can choose between Married Filing Jointly or Married Filing Separately. Filing jointly usually leads to lower taxes and more deductions, but it also means shared responsibility for any owed taxes. Filing separately may protect you from liability for your ex’s tax issues but can limit deductions and credits. A tax professional can help determine the best choice for your situation.

Who Claims the Children?

The IRS allows only one parent to claim a child as a dependent per tax year. If your divorce decree doesn’t specify who claims the children, the custodial parent—the one with whom the child lives most of the year—typically has the right. However, many co-parents agree to alternate years or split tax benefits, such as one parent claiming the Child Tax Credit while the other claims education-related deductions.

Since dependent claims directly impact tax refunds, it’s best to plan ahead. If both parents claim the same child, the IRS may reject one return, causing delays and complications.

Dividing Assets: Watch for Tax Consequences

Not all assets are created equal when it comes to taxes. Selling the family home could trigger capital gains tax, while keeping it may limit mortgage interest deductions if your name isn’t on the loan. Retirement accounts require special handling—transferring a 401(k) without a Qualified Domestic Relations Order (QDRO) can result in taxes and early withdrawal penalties.

Stock investments also come with tax considerations. Receiving shares in a divorce settlement might seem like a fair trade, but selling them later could mean owing capital gains tax. Working with financial and legal professionals can help structure asset division with future tax implications in mind.

Alimony and Child Support: What’s Taxable?

Child support payments are not taxable for the recipient and can’t be deducted by the payer. Alimony, however, depends on when your divorce was finalized:

• Agreements made before 2019 allow the payer to deduct alimony payments and require the recipient to report them as income.
• For divorces finalized in 2019 or later, alimony is neither deductible nor taxable.

These tax rules can significantly impact long-term financial planning, making it important to review support agreements carefully.

Estate Planning After Divorce

Start the Next Chapter with Confidence

Divorce doesn’t just change your tax situation—it also affects your estate plan. Here’s what you should review:

• Update your will and trust to reflect your new circumstances.
• Revise beneficiary designations on life insurance policies, retirement accounts, and financial assets.
• Consider guardianship designations if you have minor children.
• Evaluate powers of attorney and healthcare directives to ensure the right person is making decisions on your behalf.

Updating your estate plan now can help prevent complications later and provide clarity for your financial future.

Take the Next Step

Divorce brings big financial changes, and your estate plan should reflect them.

📅 Book a 15-minute discovery call today to learn more about how a Life and Legacy Planning session can help you get your financial affairs in order post-divorce.