What Does Getting Divorced Mean for Your Tax Return?

At the end of the year, many of us think about tax savings. However, if you have a pending divorce, there are some issues to consider before filing your taxes. Should you file jointly or singly? Here, we take a closer look at the legal situation. 

Are You Single or Married?

This may seem like a black-and-white question. However, the answer may not be as simple as you think. You need to know the answer since it may affect your tax filing status.

Am I Married or Single for Tax Purposes?

Under the IRS’ rules, you are still technically married if you don’t finalize your divorce by Dec. 31. This applies even if you filed for the divorce at some point during that year. 

What happens if the court issues your divorce decree on Dec. 31? It means you can consider yourself as having been unmarried for the entire year. This means you need to file your tax return as a single person. 

It makes no difference if you live separately from your spouse. If you don’t have your divorce finalized by the last day of the year, you’re still considered to be married. If you’re living apart on Dec. 31 without a court order to say you’re separated, you’re married for tax purposes.

Should I File A Single or Joint Tax Return if I’m Technically Still Married?

If you’re still technically married on Dec. 31, you can choose whether to file a joint tax return. This is possible even if you’re no longer living together. 

Why would you choose to do this? It can make you eligible to receive a higher standard deduction if you combine your two incomes on one return. Yet, that doesn’t necessarily mean you’ll benefit from taking this course of action. 

The 2019 standard deduction for a separate married return is $12,200. This is $200 more than the deduction in 2018. The 2018 deduction will apply to the return you’ll file in 2019 for that year. That’s the same amount as the single filers’ standard deduction. In 2019, married couples who file jointly receive a standard deduction of $24,400. This is $400 more than the same deduction for 2018.

If you earn a comparable income to your spouse, it may not be worth filing jointly. If you divide the $24,400 deduction between you, you receive $12,200 each. This is the same amount as you’d claim by filing your separate return. Conversely, if you have a higher income than your spouse, the $24,400 subtracts significantly from the taxable income.

Is There A Downside to Filing Jointly?

When you file a joint tax return, you will both become jointly and severally liable for the taxes due. This will apply even on any income that your spouse personally earned. Imagine you earned only $20,000 while your spouse earned $80,000. The IRS will collect the tax due on $80,000 from you if it remains unpaid by your spouse. You’d also be responsible if your spouse was dishonest or fraudulent about his or her deductions, credits, or income. When your marriage is ending, this may not be something you want to risk.

It’s always wise to seek legal advice when filing your tax return if you have a pending divorce. This will ensure you make the right decision for you. Contact our legal team today to find out more.

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