Are you thinking, “Taxes can wait while I deal with my divorce”?
In reality, choosing the wrong filing status or claiming child tax credits incorrectly could cost you thousands of dollars in extra taxes.
This article explains how your filing status changes before and after divorce, how to handle child tax credits (Form 8332), and the crucial concept of Temporary Absence when determining Head of Household status.
【Client Case Study】
Mari (pseudonym) thought she could file as Single because she was living separately from her spouse. Fortunately, she consulted before filing and submitted her return correctly as Married Filing Separately. Had she filed as Single, she would have needed to amend her return later and pay additional taxes.
Can You File as Single During Divorce?
One common question is:
“I’m separated during divorce proceedings. Can I file as Single?”
Answer: Unless your divorce is legally finalized, you cannot file as Single.
Basic Rules if Your Divorce Is Not Final
If you are still legally married at the end of the year, you must file either:
- Married Filing Jointly, or
- Married Filing Separately
Exception: Considered Unmarried (Head of Household Eligibility)
However, you can file as Head of Household if all the following conditions are met:
- You did not live with your spouse during the last six months of the year (excluding Temporary Absences).
- You are still legally married on December 31.
- You paid more than half the cost of keeping up your home.
- Your child or dependent lived with you for more than half the year.
Even if you are legally married, the IRS treats you as “Considered Unmarried,” allowing you to file as Head of Household, which provides better tax rates and higher standard deductions compared to Single.
What is Temporary Absence?
The concept of Temporary Absence is crucial here.
Temporary Absence means situations where you or your spouse are away but are still considered living together for tax purposes.
Examples include:
- Education (e.g., child living in a college dorm)
- Medical care or rehabilitation (e.g., long-term hospital stays)
- Business trips
- Military service
- Temporary separations due to family issues when divorce proceedings have not started
In these cases, you are still considered living together, and the six-month separation requirement for Head of Household is not met.
Difference Between Single and Married Filing Separately
Many people think, “Aren’t tax rates the same for Single and Married Filing Separately?”
In reality, Married Filing Separately often results in disadvantages, such as:
- No Earned Income Credit eligibility
- No student loan interest deduction
- Lower contribution limits for IRA accounts
- Standard deduction is the same as Single, but tax brackets can be less favorable than Married Filing Jointly or Single
Emotional Considerations
Many people feel uncomfortable choosing Married Filing Separately, but as long as you remain legally married, filing as Single is not allowed.
However, if you meet the requirements above, filing as Head of Household gives you more favorable tax rates and deductions than filing as Single.
Who Claims the Child Tax Credit After Divorce?
If you have children, deciding who claims the Child Tax Credit is critical.
IRS Basic Rule
Generally, the custodial parent (the parent with whom the child lived more than half the year) has the right to claim the Child Tax Credit.
What If Custody Time Is 50-50?
If the child spent exactly equal time with both parents, parents must decide who claims the credit.
If they cannot agree, the IRS Tie-Breaker Rule applies:
- The parent is prioritized over a non-parent.
- If both are parents, the one with the higher Adjusted Gross Income (AGI) has priority.
What is Form 8332?
When a custodial parent allows the noncustodial parent to claim the Child Tax Credit, Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent) must be submitted.
Key points:
- Oral agreements or divorce decrees alone are not enough.
- The form must be submitted every year, unless the divorce decree includes a multi-year release.
Without this form, if the noncustodial parent claims the credit, the IRS will deny it.
Summary
- If your divorce is finalized, you can file as Single or Head of Household (if eligible).
- If your divorce is not finalized, you must file as Married Filing Jointly, Married Filing Separately, or Head of Household (if eligible).
- Temporary Absences do not count towards the six-month separation requirement for Head of Household.
- The custodial parent generally claims the Child Tax Credit.
- If the noncustodial parent claims it, Form 8332 is required.
💡 Divorce is a new beginning.
Preparing your taxes properly now can save you from stressful amendments and unexpected tax bills later.
Hiromi K. Stanfield, CPA Inc. has extensive experience supporting clients through divorce-related tax matters.
👉 Contact us for your initial consultation today (online consultations available, strict confidentiality assured).
Comment