Tax Returns In The Year Of Divorce
Since you were married for most of the year and your domicile is in a community property state (Texas is one of nine community property states), you have community income, consequently, special rules determine each parties’ income for income tax purposes in the year of divorce. You will be filing your return based on your martial status on December 31. If you are still married, I will encourage you to file a joint return since the tax tables are more favorable than married filing separately. If you are divorced by year-end, here are the rules for filing your two single returns:
For spouses who have lived apart all year, special rules if all the following conditions exist:
If you do not meet the above conditions, the rules that do apply are that you must report half of any income described by the state law as community income, and the other party must report the other half up until the date of divorce. Each of you can claim credit for half of any income tax withheld from community wages or estimated tax payments.
When the marital community ends by divorce, the community assets (money and property) will be divided. Income received after the community ended is separate income, taxable only to the spouse to whom it belongs. The division of property is never taxable income even if it is not split 50/50.
For the above reasons, it is usually preferable that in a year of separation or the year of divorce, one person prepare both tax returns. This will help relieve some of the tension and confusion of exchanging information among different parties and will guarantee that all the income is picked up by both parties.
For spouses who have lived apart all year, special rules if all the following conditions exist:
- You and your spouse live apart all year.
- You and your spouse do not file a joint return for a tax year beginning or ending in the calendar year.
- You or your spouse has earned income for the calendar year that is community income.
- You and your spouse have not transferred, directly or indirectly, any earned income in (3) between yourselves before the end of the year. Do not take into account transfers satisfying child support obligations or transfers of very small amounts or value.
If you do not meet the above conditions, the rules that do apply are that you must report half of any income described by the state law as community income, and the other party must report the other half up until the date of divorce. Each of you can claim credit for half of any income tax withheld from community wages or estimated tax payments.
When the marital community ends by divorce, the community assets (money and property) will be divided. Income received after the community ended is separate income, taxable only to the spouse to whom it belongs. The division of property is never taxable income even if it is not split 50/50.
For the above reasons, it is usually preferable that in a year of separation or the year of divorce, one person prepare both tax returns. This will help relieve some of the tension and confusion of exchanging information among different parties and will guarantee that all the income is picked up by both parties.