Divorce & Taxes: Planning for a Smoother Financial Transition

April 15, 2024

Divorce is a complex life event with emotional and financial dimensions. While it’s easy to get caught up in the immediate turmoil, it’s crucial to think strategically about your financial future, including the tax implications that come with a change in marital status. Let’s discuss some ways to navigate divorce and taxes for the best possible outcome.


Investing Your Tax Refund Wisely


Getting a tax refund can feel like a windfall during a stressful time. However, consider this: Could that refund be wisely invested in facilitating a smoother, more amicable divorce process?


Traditional litigation-based divorces can be expensive. When spouses can work together, legal fees are often much lower. That’s where I come in: I can help you turn your tax refund into your uncontested divorce. Agreeing to divide assets (stuff) means a better chance of preserving more of your money as you rebuild your life. Investing your refund in a process designed to foster cooperation can be a wise decision that pays dividends in the long run.


Post-Divorce Taxes: Adjust Your Withholding Now


If divorce is on your horizon this year, it’s important to proactively change your tax withholding status. Delaying this adjustment could result in a hefty and unwelcome tax bill next year.


Most couples filing jointly have their taxes withheld based on combined income. When that income is split in two, withholding at the married rate can lead to underpayment when you file taxes as an individual. Switching your withholding status to ‘single’ will generally increase the amount withheld per paycheck, reducing the chances of a large tax bill down the line.


The IRS Withholding Estimator (https://www.irs.gov/individuals/tax-withholding-estimator) can help you calculate how much tax should be withheld based on your new filing status.


December 31: Why This Date Matters to Your Taxes


The IRS cares about one crucial date: December 31st. Your marital status on that date dictates how you’ll file your taxes for the entire tax year. Let’s look at what this means for your 2025 tax filing:


  • If your divorce is final by December 31, 2024: Your filing status for the entire year will be considered ‘Single’. You may also qualify for ‘Head of Household’ status if you meet the specific IRS guidelines.


  • If you are still married on December 31, 2024: You’ll need to choose between ‘Married Filing Jointly’ or ‘Married Filing Separately’.


Being aware of the significance of this date allows you to make informed financial decisions in the lead-up to the end of the year.

Don’t Go it Alone


Navigating taxes during divorce can be emotionally draining and overwhelming. It’s okay to ask for help! Reach out to my office or call me to see if I can help your next April 15 be a lot smoother


Disclaimer: This blog is for informational purposes only and should not replace the advice of qualified tax and legal professionals. Seek personalized help for your specific situation.