Navigating your upcoming income tax return after divorce

If your divorce was finalized last year, you’ll need to take some extra time with your 2022 income tax return. There will likely be a number of changes. You’ll probably want to consult a tax professional to help ensure that everything is done accurately. If you and your ex have a tax preparer, now is the time to find your own.

Everyone’s situation is different. However, there are some things that just about every newly divorced person (especially those with dependent children) needs to consider. Let’s take a brief look at those.

Filing status

If your divorce was finalized at any point in 2022 (assuming you haven’t already remarried), you can file as “single” or possibly as “head of household.” To file as head of household, you must have had a dependent (generally a child or an elderly or disabled family member) living with you for more than half of 2022. You must also have paid for more than 50% of the cost of maintaining your home last year.

Capital gains

This is something divorcing couples often are concerned about as they’re dividing property. Fortunately, they generally don’t have to be. The IRS exempts asset transfers made in the divorce from capital gains (and losses). These are considered “incident to the divorce.”

The first year after the divorce, you don’t need to worry about them – or even provide documentation that shows they were part of the divorce. After that, things begin to get more complicated.

Claiming dependents

Only one parent can claim a child as their dependent on their tax return in a given year. That’s important for deductions and using “head of household” status. Generally, this is the parent with whom the child lives most of the time. When exes have equal parenting time, typically one just needs to show that the child resided with them just over 50% of the year.

This is something that it’s wise to work out during your divorce. That way, both of you aren’t claiming the same child in a given year and you can work out a way to maximize your deductions for your child(ren).

If your divorce will be finalized this year, it’s important to keep these and other tax considerations in mind for next year. Having sound legal guidance as well as getting tax advice can help.