When couples in Tennessee undergo a divorce, they have many things to think about. The tax implications are probably one of the last things they consider. Nevertheless, the decisions they make in filing taxes after the divorce and the wording of their divorce agreement can significantly affect their tax refund.
Tax filing status
Your tax filing status relies on the completion date of your divorce. If your divorce gets finalized on or before December 31, the last day of the tax year, you are not eligible to file a joint return. However, if your divorce is finalized in the new year, the IRS will still consider you a married individual, allowing you to file a joint return for the previous year. Even if you qualify for a joint return, you can choose the “married filing separate” status.
Benefits of a joint return
The most significant benefit of filing a joint tax return is that you are eligible for a higher standard deduction. 2022 the standard deduction for married couples filing jointly was $25,900. Single taxpayers got a $12,950 deduction, whereas married individuals who filed separately were eligible for a $19,400 deduction if they were the head of household. For the 2023 tax year, these numbers are due to increase.
Head of household filing
Even if you opt to file separately following your divorce, there is a possibility of saving money by filing as the head of the household. To qualify for this status, you must provide evidence that you were considered legally separated, divorced or single by December 31. Additionally, you must demonstrate that you paid more than 50% of the home upkeep costs and lived with a qualified dependent, such as your child, for over six months of the year.
Filing taxes post-divorce can become complex. Nevertheless, effective communication and strategic planning can position yourself for the most favorable outcome during the tax season.