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Your First Time Filing Taxes After Indianapolis Divorce

By James Emerson on February 1, 2022

Divorce can cause upheaval in a person’s life. It can also complicate income taxes. Different rules will apply at different steps of the divorce process. If you are going through, or have recently gone through, an Indianapolis divorce, the following is what you can expect your first time filing taxes after your divorce becomes final.

What Will the First Tax Season Look Like After Divorce?

For the year in which you become officially divorced, you will need to file a separate tax return. Your options for filing status are “single” or “head of household.” If you and your former spouse are sharing custody of one or more children, only one of you can file as head of household. You can choose this status only if you meet all these requirements:

• You lived with a qualifying dependent for more than six months of the year.
• You paid more than half the costs of maintaining a home for the year. These costs may include food, utilities, home repairs, homeowner’s insurance, and real estate taxes.
• You were single, legally separated, or divorced on the last day of the tax year.

What Are the Available Tax Credits?

You may be able to save some money on your taxes by filing with head of household status. If you are the custodial parent, you can claim your child as a dependent. The custodial parent is usually named in the divorce decree. It is the parent the child lives with during the most nights of the tax year. Claiming your child as a dependent could make you eligible to claim the following credits:

• Earned income tax credit (EITC): This credit is designed to reduce the tax bills of low to moderate income families. It can save you thousands of dollars, depending on the number of children and the amount of earned income. EITC is refundable and can increase your tax refund.
• Child and dependent care credit: This tax credit is designed to help cover the costs of care of children and other dependents. It is calculated based on your income and the expenses you incur for the care of your child while you are working, looking for work, or attending school. The American Rescue Plan Act of 2021 made this credit substantially more generous and potentially refundable.

How Is Alimony Treated for Tax Purposes?

Tax treatment of alimony was changed by the Tax Cuts and Jobs Act (TCJA) of 2017. Before this federal law was passed, alimony payments could be deducted on your taxes, and the spouse receiving the alimony was required to report it as income. Now, for any divorce or separation agreements signed on January 1, 2019, or later, alimony payments are not tax-deductible and do not have to be reported as income. TCJA eliminated the alimony deduction and reporting requirements.

However, under divorce or separation agreements executed on or before December 31, 2018, alimony payments are deductible by the payer and taxable for the recipient. In some cases, divorce or separation agreements signed on or before December 31, 2018, may be modified to repeal the deduction for alimony payments. In that case, the recipient is not required to count them as income.

Is Child Support Taxable

Under current tax law, “Child support payments are neither deductible by the payer nor taxable to the recipient,” to quote the IRS. In calculating your gross income for your tax return, you do not include child support payments received. If you made child support payments, you are not allowed to deduct them on your taxes.

Divorce can have major tax implications for both spouses. Call Emerson Law LLC at (317) 969-8000 to consult with experienced Indianapolis divorce attorneys.