Income Tax Filing Status While Divorce Is Pending

Because divorce proceedings may be pending at the end of a tax year, it is important for the parties to determine whether the parties' income tax filing status has changed. The parties’ tax liabilities will vary depending on such status. There are four filing categories for spouses:

1. Married filing a joint return
2. Head of household
3. Married filing separate returns
4. Unmarried or single

Joint Returns

The filing status generally depends on whether the taxpayers are married for tax purposes on the last day of the taxable year. If the taxpayers are married, a joint return may be filed with the spouse for the entire year even if the parties live apart. The parties remain married for tax purposes unless there is a final divorce, a court decree of separate maintenance ordering the parties to live apart, or application of the abandoned spouse rule, which is discussed later. A court decree that merely enforces a right to support payments, such as a temporary support order, does not constitute a decree of separate maintenance.

If a joint return is filed, each spouse is jointly and severally liable for the entire tax liability shown on the return and any taxes later assessed by the IRS for such tax year.

Head of Household

To qualify for head of household filing status, the individual (a) cannot be married on the last day of the year, (b) must maintain a home or the principal place of abode for a child for over one-half of the year, and (c) must pay over one-half of the expenses of maintaining that home. If the parent provides over half of an adult child’s support but does not qualify for the dependency exemption, the parent still qualifies for head of household filing status.

An individual who is legally married is not treated as married for tax purposes if he or she meets the requirements of the abandoned spouse rule. Under the abandoned spouse rule, a spouse who (1) pays more than one-half of the cost of maintaining his or her household, (2) maintains that household as the principal home for a dependent child for more than six months of the year, (3) files a separate tax return and (4) lives apart from his or her spouse for the last six months of the taxable year is eligible to file as head of household. The spouse who qualifies as the custodial parent and, therefore, is entitled to the dependency exemption also meets criterion (2), even if the exemption is assigned to the non-custodial parent under a written agreement.

The abandoned spouse rule can apply to any spouse who is separated during the last six months of the year. Therefore, the opportunity to use head of household filing status is not limited to deserted spouses.

Separate Returns

In some cases, the divorce proceedings are so acrimonious that the parties cannot cooperate enough to prepare a joint return. Alternatively, one spouse may be concerned that the other spouse is underreporting income or overstating deductions and does not wish to be exposed to future tax assessments that could result from a joint return. Under such circumstances, the parties can file as married filing separate returns.

If separate returns are prepared, either the standard deduction must be used by both spouses or itemized deductions must be used by both spouses. This consistency requirement may produce significantly different individual and combined tax liabilities. Separate returns also reduce many tax exemptions and limits such as the alternative minimum tax exemption and the $25,000 exclusion from passive losses of rental real estate.

Unmarried or Single

For the year when a divorce decree is final or the court issues a decree of separate maintenance, each party is unmarried for tax purposes unless he or she marries a former or new spouse before December 31. Once the parties are unmarried for tax purposes, they must file as single unless they qualify for the head of household status.