If you’re looking at the beginnings of a separation or divorce proceeding, the division of assets is always one of the biggest pieces of the negotiations.
Knowing the tax implications heading into these negotiations can ensure that you’ll come out financially ahead not just in the near-term, but also when it comes time to file in early 2021.
Firstly, under IRS rules, you’re technically still married if your divorce is not finalized by the end of the current tax year. So if on Dec. 31 your proceeding hasn’t wrapped up, you’ll still be considered married and will likely continue filing jointly if you were doing that before the divorce.
Are There Benefits to Filing Jointly?
You can still claim the higher standard deduction as a couple, $24,800, whereas the “separate married return” deduction is $12,400 in 2020, which is the same amount as a single filer. However, you’re also liable as a couple for all taxes owed, even if one spouse made more income than the other. If one spouse is delinquent on taxes, the IRS could come after the other spouse for monies owed.
You might be able to deny liability in certain cases, but there’s no guarantee that the IRS will see things your way.
Filing as Head of Household
Technically, you can also file as head of household as long as you and your spouse stopped living together before the last six months of the tax year and you paid more than 50% of home maintenance costs for the same tax year. You’d also have to have a dependent and the right to claim said dependent. It goes without saying that you’d need to file separately as well.
There are other, more specialized tax issues for those with high-net-worth or considerable business assets that could be split in a divorce.
With all of the financial implications at stake, it’s crucial to consult a qualified divorce attorney. Call the team at The Law Offices of Rusty Williard today at (601) 824-9797 to learn how we’ve advised Brandon and Jackson clients through difficult divorce negotiations.