You’ve filed taxes jointly with your spouse throughout your marriage, but now you and your spouse are divorcing. Should you file your taxes jointly during your divorce, and are you even eligible to do so? There are tax advantages to filing jointly, but you’re also concerned that you and your spouse might not be married by the end of the year. This article will explain when you can and can’t file taxes jointly during a divorce, and details why you may choose to file jointly or separately.
When Are You Eligible to File Jointly?
You can only file your taxes jointly for a particular year if you’re still married at the end of the tax year. In other words, you can file jointly for the year 2017 if the court hasn’t issued a final decree of divorce on or before December 31, 2017.
If you’re in the middle of your divorce but still eligible to file your taxes jointly for a given year, you and your spouse must both agree to file taxes jointly. If either you or your spouse don’t wish to file a joint return, you’ll both need to file as “married filing separately.”
Many divorce settlement agreements will explicitly state that you should be filing your taxes separately in the future—once the court accepts your signed divorce settlement agreement and issues a final divorce decree (divorce judgment) you’re no longer eligible to file taxes jointly for any year that hasn’t been completed. For example, if the court enters a final decree of divorce in February of 2017, you could still file joint taxes for the previous year (2016), but not for the current year (2017).
Why Would You File Jointly?
It’s often the case that it’s to one spouse’s advantage to file jointly, while it makes no difference to the other spouse. A spouse who makes a lot of money may want to file jointly, to receive the extra tax deductions that go along with being a head of household, and if there are any children eligible to be claimed as dependents. It can also mean mortgage interest deductions, or other credits related to filing jointly. Meanwhile, the other spouse may have lower income and it would make no difference or actually lower the tax refund to file jointly with the other spouse. Under these circumstances, the spouses should negotiate so that it’s beneficial to both spouses to file their taxes jointly.
If you are filing jointly for taxes during your divorce, your agreement should spell out how any taxes due or refunds will be divided between you and your spouse. For example, you may choose to divide any tax burden or refund evenly (50/50) between you. Alternatively, you may decide that any tax deficiency should be borne by the spouse whose income is responsible for the taxes. In some cases, you may plan for the contingency that it will be impossible to determine which spouse’s income is responsible for the tax deficiency and determine another division of tax liability, for example, dividing any tax payments in proportion with the spouses’ respective incomes. Particularly when there is a large disparity in the spouses’ incomes, you should be careful how you apportion the responsibility to pay any taxes due. A large income can result in a large tax liability; if you’re the spouse with less income, you don’t want to end up being responsible for a tax bill way above your ability to pay.
You and your spouse must make the decision to file taxes separately or jointly—typically, the court won’t order you to file jointly. Don’t file jointly simply because that’s what you and your spouse have done over the course of the marriage. You should be receiving some benefit in exchange for filing together, or you may feel resentment when the tax bill or refund comes.
When Might You File Separately?
There are a number of reasons why you may choose to file separately. If you and your spouse are involved in an acrimonious divorce, the thought of having to cooperate to file taxes may be distasteful. Also, if you would receive a refund by filing your taxes separately, but would end up owing money by filing with your spouse, it may be better to file separately unless your spouse is compensating you for the refund you’d be losing.
If your spouse has significant tax liability that he or she can’t pay, you won’t want to file jointly, as the IRS can go after both you and your spouse to pay the debt. Similarly, if your spouse has been audited in the past, or has issues where you think there’s potential for tax fraud, it won’t be worth the headache or even the payment of a shared refund to file jointly with your spouse. If you can’t trust your spouse to behave honestly regarding your taxes, you probably don’t want to invite potential legal trouble by signing joint tax filings.
If you do file separately, you must either file “married filing separately” or “head of household.” To file as a “head of household,” you’ll need to be able to show each of the following:
- you have paid more than half the cost of maintaining your household during the tax year
- you have a qualifying child (has lived with you for at least half the year) or other dependent, and
- you have lived separately from your spouse for at least the last six months of the tax year.
Whatever you decide with regards to filing your taxes during a divorce, the most important thing to remember is that it’s your decision. Your spouse can’t force you to file joint taxes, and the court typically won’t order you to file your taxes jointly either. It's up to you whether you file your taxes separately or jointly with a spouse you’re divorcing. If you have additional questions about how to file your taxes during a divorce, it’s best to consult a local family law attorney and an experienced accountant.