How Does an Impending Divorce Affect Your 2021 Income Taxes?

If you haven’t yet begun your divorce or if you’re still in the process, and it won’t be finalized until next year, you and your spouse will need to decide how to file your 2021 income taxes. 

As long as your divorce is not final by Dec. 31, you can still file a joint tax return as “married filing jointly.” There are often significant tax benefits to doing this. However, if you’ve learned or begun to suspect that your spouse may have been handling your taxes less-than-honestly, it might be best to separate your tax returns as soon as possible. 

All married couples have the option to file separate tax returns as “married filing separately.” It’s best to get independent tax guidance as well as legal guidance.

Do you qualify for “head of household” status?

Another option you may have if you and your spouse were living separately for at least the last six months of the year and you were primarily responsible for taking care of your children is to file as “head of household.”

The tax authorities are very specific about who can use this filing status because it comes with some significant benefits, so be sure that you qualify before you do it. To file as “head of household:”

  • Your spouse must have permanently been out of the home for the last half of the year (not returning home to stay sporadically or spending weekends there, for example).
  • Your children must have lived there for more than a total of six months throughout the year.
  • You were responsible for over half the costs associated with the home (mortgage payments, rent, taxes, insurance, maintenance, and so forth) during the year.
  • You must also be able to qualify to claim the child exemption on any child living in the home.

Who claims the children as dependents after the divorce?

Your divorce is a good time to determine how you will deal with this exemption once the divorce is final. Some parents who share custody of their children equally will take turns claiming them each year. If you have more than one child, you may each decide to claim one or more every year.

While your mind is likely more focused on your divorce than on taxes right now, Tax Day will be here before you know it. It’s best to begin thinking about these things now.

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