Divorce and taxes: what you need to know

Divorce rates are on the rise, with 50% of married couples opting for one. However your clients came to this decision, it’s not an easy one. Being their financial sounding board during this time of uncertainty could be just what they need.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: If a couple is married but living separately for more than six months, why can’t they file as single?

A: If the divorce is not finalized, you cannot file as single. When married, the taxpayer must file as married filing jointly (MFJ) or married filing separately (MFS). They may qualify for head of household (HOH) status if they do not live together for the last six months of the year and have a qualifying child.

Q: Can two individuals claim HOH under one roof for years before 2023?

A: Yes, if there are two people sharing a home and each is providing for their own children, with none of the children being theirs together.

Q: Can both parents have 50/50 custody and be considered custodial parents for tax purposes?

A: For one child with 50/50 custody through the courts, only one parent can be the custodial parent for tax purposes if the parents do not live together. The custodial parent is the one with whom the child spends the most nights during the year.

Q: Does signing Form 8332 allow the noncustodial spouse to claim HOH status even if the child does not live with them?

A: No, signing Form 8332 allows the noncustodial parent to claim the child as a dependent. The custodial parent who signed the Form 8332 is the only one allowed to claim the HOH status.

To learn more about understanding the tax issues of divorce, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial at natptax.com/explore.