Filing Status for Separated or Divorcing Taxpayers

Filing status for a tax year is determined on the last day of the tax year. If the taxpayers are married on the last day of the tax year (including those taxpayers in the process of divorce), then they have the following filing alternatives: 

  • Married Filing Separately - This status is used when married taxpayers do not wish to file jointly. There are a number of punitive tax issues associated with married taxpayers filing separately.

These laws were written to prevent married taxpayers from filing separate returns to take advantage of certain situations. The following are some of the commonly encountered issues:

    • To prevent one taxpayer from filing with itemized deductions and the other taking the standard deduction, the tax law requires both taxpayers to either itemize their deductions or take the standard deduction. Generally, if either itemizes their deductions, then both must itemize even if the deductions are less than the standard.
       
    • To prevent taxpayers from splitting their income and reducing it below the taxable income threshold for Social Security, the threshold for married separate taxpayers is zero. Normally, for joint filing taxpayers, the threshold is $32,000.
       
    • Passive income losses on a joint return are limited to $25,000, and that limitation is ratably reduced to zero between $100,000 and $150,000 of income. To keep married taxpayers from filing married separate to get around the income limitation, the deduction limit is cut in half and the phase-out occurs between $50,000 and $100,000.

The government has addressed and eliminated most tax benefits derived from filing separately for married individuals. So, if you are considering such a move, be sure to discuss the possible ramifications with this office before proceeding.

  • Married Filing Jointly - Married taxpayers, even if only one spouse had income, may file jointly. Once a joint return has been filed, the joint filers may not change to filing separate returns after the unextended due date of the tax return (generally April 15th of the following year). However, a taxpayer may file a joint amended return after filing married separate, if the change is made within THREE YEARS from the unextended due date of the original return.
     
  • Head Of Household - Married individuals may use this status to file individually if they:

(a) Lived apart from their spouse at least the last six months of the year,

(b) Maintained a home for themselves and their dependent child or stepchild for more than half the year (nondependent child qualifies only if taxpayer gave written consent to allow the dependency to the noncustodial parent, or the noncustodial parent has the right to claim the dependency under a pre-'85 divorce agreement), and

(c) Paid more than half the cost of that home.