Tax Considerations to Keep in Mind During Divorce

Divorce involves emotional, logistical, and financial decision-making — and as the year draws to a close, tax planning becomes a particularly important part of the process. The financial agreements made during divorce will impact each person’s financial well-being long after the divorce is final, so understanding how taxes are affected can help you make thoughtful, informed choices.

While mediation does not replace the guidance of a financial professional, mediation does provide a supportive environment for spouses to understand their financial picture, ask questions, and make decisions that feel fair, transparent, and sustainable.

Below are key tax-related considerations to keep in mind during divorce:

1. Filing Status for the Tax Year

Your marital status on December 31 determines your tax filing status for the entire year. If your divorce is not finalized by the last day of the year, you may have the choice to file:

• Jointly

• Married filing separately

Filing jointly can sometimes provide tax benefits due to deductions and credits. However, it also requires trust, cooperation, and clear understanding of any tax liabilities or refunds.

If your divorce is finalized by December 31, you will file as either:

• Single

• Head of Household (if you qualify and have a dependent living with you most of the year)

Understanding this early can prevent disputes later and can be incorporated into your

mediation discussions.

2. Claiming Dependents

Only one parent can claim a child as a dependent each year, which impacts tax credits such as:

• Child Tax Credit

• Earned Income Credit

• Child and Dependent Care Credit

Many parents choose to alternate years, while others assign the credit based on income or support contributions. What matters most is clarity — ideally written directly into your parenting plan.

3. Understanding the Difference Between Child Support and Spousal Support

• Child Support is not taxable income and not tax-deductible.

• Spousal Support (Alimony) depends on when the divorce agreement was executed. For agreements finalized after January 1, 2019, alimony is not deductible or taxable.

This distinction can influence how you structure support agreements in mediation.

4. Division of Retirement Accounts

Dividing retirement assets often requires a Qualified Domestic Relations Order (QDRO) to avoid penalties. Mediation helps couples discuss these assets clearly, with mutual understanding — not confusion or conflict.

You Don’t Need to Navigate This Alone

Taxes can feel overwhelming, especially while emotions are high. Mediation provides a calm, respectful environment to work through financial decisions with clarity and fairness — protecting each person’s long-term stability.

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