Tax Effects on the Newly Divorced or Separated Seasoned Woman

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It’s tax time again. It came upon us so quickly. It seems like we just finished the previous tax season. This may be because the previous season was extended to July 15, 2020, due to Covid-19. This gave us three additional months past the April 15, 2020 deadline. Being a newly divorced or separated seasoned woman could affect your filing status and the credits you qualify for. Let’s talk about newly divorced seasoned women first. If you are divorced under a final decree by December 31st, you are considered unmarried for the entire year. Your filing status will likely be single if you don’t qualify for any other filing status, such as Head of Household. The good news is if you are receiving alimony, it is no longer taxable as income beginning January 1, 2019. This is a huge plus for newly divorced seasoned women. Prior to January 1, 2019, the alimony you received had to be included in your taxable income. This also means that if for some reason, you were required to pay alimony to your former spouse, you can’t deduct it from your taxable income. If you are newly separated from your spouse under a separate maintenance agreement beginning January 1, 2019, the separate maintenance payments are not included in your taxable income. On the other hand, if you make payments to your spouse under the same circumstances, you cannot deduct these payments from your taxable income.  

How long you have been separated can also determine your filing status. Normally as a married person, you can file Married Filing Jointly or Married Filing Separately. You are generally considered married for the whole year if you are still married on December 31st. If you file Married Filing Separate, you usually pay more taxes than Married Filing Jointly since your taxes are generally higher. Some couples choose to file separately for various reasons, such as one spouse may have debt or other liabilities that the other spouse is not responsible for. If your spouse itemizes deductions, then you can’t claim the standard deduction and vice versa. In some cases, the standard deduction ends up being higher than the itemized deduction. Generally, if you are not separated under a separate maintenance agreement, your filing status would normally be Married Filing Jointly or Married Filing Separate.  However, if your spouse didn’t live in your home during the last six months of the year (not due to a temporary absence), you are considered unmarried. You are then allowed to choose another filing status depending on your circumstances. The other choices are Single and Head of Household. If you choose to file Married Filing Separate because you lived with your spouse during the last six months of the year, there are certain credits you do not qualify for, such as the Earned Income Credit and Education Credits. You also cannot take the deduction for student loan interest or the deduction for tuition and fees. Your rental property losses may also be eliminated based on when you separated.

Be sure to seek the advice of a knowledgeable tax professional. As an individual who has prepared taxes for over 20 years, I know how important it is to have a competent tax professional prepare your tax return. The tax laws are constantly changing, and one has to keep abreast of these changes. I remember telling my tax professor that I would never be working in the tax field because of the constant changes in the tax laws. Fast forward, I have been preparing taxes for over 20 years. The moral of the story is to never say never.

By Emmerstine Mackie

Divorce Coach for the Seasoned Woman