Key Tax Tips on the Tax Effects of Divorce or Separation
Clarification Aug. 26, 2015: The item on a spousal IRA, formally known as Kay Bailey Hutchison Spousal IRA was removed from this Tax Tip. Those rules apply to married taxpayers who file a joint return. If you get a final decree of divorce or separate maintenance by the end of your tax year, you are unmarried for the entire year.
IRS Summertime Tax Tip 2015-23, August 24, 2015 Español
Income tax may be the last thing on your mind after a divorce or separation. However, these events can have a big impact on your taxes. Alimony and a name change are just a few items you may need to consider. Here are some key tax tips to keep in mind if you get divorced or separated.
- Child Support. If you pay child support, you can’t deduct it on your tax return. If you receive child support, the amount you receive is not taxable.
- Alimony Paid. If you make payments under a divorce or separate maintenance decree or written separation agreement you may be able to deduct them as alimony. This applies only if the payments qualify as alimony for federal tax purposes. If the decree or agreement does not require the payments, they do not qualify as alimony.
- Alimony Received. If you get alimony from your spouse or former spouse, it is taxable in the year you get it. Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty. To do this, you can make estimated tax payments or increase the amount of tax withheld from your wages.
- Name Changes. If you change your name after your divorce, notify the Social Security Administration of the change. File Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov or call 800-772-1213 to order it. The name on your tax return must match SSA records. A name mismatch can delay your refund.
Health Care Law Considerations
- Special Marketplace Enrollment Period. If you lose your health insurance coverage due to divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return. Losing coverage through a divorce is considered a qualifying life event that allows you to enroll in health coverage through the Health Insurance Marketplace during a Special Enrollment Period.
- Changes in Circumstances. If you purchase health insurance coverage through the Health Insurance Marketplace you may get advance payments of the premium tax credit in 2015. If you do, you should report changes in circumstances to your Marketplace throughout the year. Changes to report include a change in marital status, a name change and a change in your income or family size. By reporting changes, you will help make sure that you get the proper type and amount of financial assistance. This will also help you avoid getting too much or too little credit in advance.
- Shared Policy Allocation. If you divorced or are legally separated during the tax year and are enrolled in the same qualified health plan, you and your former spouse must allocate policy amounts on your separate tax returns to figure your premium tax credit and reconcile any advance payments made on your behalf. Publication 974, Premium Tax Credit, has more information about the Shared Policy Allocation.
For more on this topic, see Publication 504, Divorced or Separated Individuals. You can get it on IRS.gov/forms at any time.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.
Additional IRS Resources:
- Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)
- Publication 555, Community Property
- Publication 974, Premium Tax Credit
- Publication 5152: Report changes to the Marketplace as they happen English | Spanish
IRS YouTube Videos:
- Changed Your Name After Marriage or Divorce? – English | Spanish | ASL (Obsolete)
- Premium Tax Credit – English | Spanish | ASL (Obsolete)
- Premium Tax Credit: Changes in Circumstances – English | Spanish | ASL
- Premium Tax Credit – English | Spanish (Obsolete)
- Changed Your Name After Marriage or Divorce? – English | Spanish (Obsolete)