As fall arrives, many couples face the same question: should we finalize a divorce before year-end, or wait until January? It might seem like a small scheduling detail, but the date your divorce is final can change how you file your taxes for the whole year. A little planning now can prevent surprises in April and help you make choices that work for your family.
Here’s what to know about divorce, taxes and the December 31 deadline.
This article is general information, not tax advice. Always talk with a CPA or tax professional about your own situation.
Why December 31 Matters
For federal tax purposes, your marital status on the last day of the year decides your filing status for the entire year. According to IRS Publication 504:
- If your divorce is final by December 31, you’re considered unmarried for the whole year.
- If your divorce isn’t final by December 31, you’re considered married for the whole year, even if you’ve been separated for months.
That one date can affect your tax bracket, your standard deduction and which credits you qualify for. In Maryland, your state filing status generally follows your federal status, as explained in Maryland’s filing status regulation.
Your Filing Status Options
If You’re Still Married on December 31
You can generally choose between:
- Married filing jointly. This often results in a lower combined tax bill, but both spouses share responsibility for the return and any tax owed. You’ll need to cooperate to prepare and sign it.
- Married filing separately. You’re responsible only for your own return, but this status often means higher taxes and fewer available credits.
If You’re Divorced by December 31
You’ll file as:
- Single, or
- Head of household, if you qualify. Generally, you must be unmarried, pay more than half the cost of keeping up your home, and have a qualifying person, such as your child, living with you for more than half the year.
Good to know: Some separated parents can file as head of household even if they’re still legally married. The IRS may treat you as “considered unmarried” if you lived apart from your spouse for the last six months of the year and meet other requirements. The IRS explains this in its guide to filing taxes after divorce or separation.
Other Tax Issues to Plan For
Alimony
For divorce or separation agreements signed after December 31, 2018, alimony is not deductible for the payer and not taxable income for the recipient on your federal return. Older agreements may follow different rules. See IRS Topic 452 on alimony for details.
Child Support
Child support is never taxable to the parent who receives it or deductible for the parent who pays it.
Claiming the Children
Generally, the custodial parent (the parent the child lives with for more nights during the year) claims the child. The custodial parent can release that claim to the other parent using IRS Form 8332. Your separation agreement should spell out who claims each child, and in which years.
The Marital Home
If you’re selling the house, when you sell it and who owns and lives in it can affect how much gain you can exclude from tax. IRS Publication 523 covers the rules for selling your home.
Retirement Accounts
Dividing a 401(k) or pension usually requires a Qualified Domestic Relations Order (QDRO). Done correctly, it lets you divide the account without triggering immediate taxes or penalties. Done incorrectly, it can be costly.
Property Transfers
Transfers of property between spouses as part of a divorce generally aren’t taxable when they happen. However, the person who receives an asset usually takes on its original tax basis, which can affect taxes when that asset is sold later.
Should You Finalize Your Divorce Before Year-End?
There’s no one right answer. Finalizing a divorce before year-end may make sense if:
- You’d benefit from filing as single or head of household
- You want a clean financial break before the new year
- Working with your spouse on a joint return isn’t realistic
Waiting until January may make sense if:
- Filing jointly one last time saves your family money
- You’re still working through important financial issues
- You need more time to reach a fair agreement
Rushing to meet a deadline should never mean accepting an agreement you don’t fully understand. Divorce mediation can help you and your spouse work through these decisions together, with your tax professional’s input.
Can You Still Finalize Before December 31?
It depends on where you are in the process. If you and your spouse agree on everything, an uncontested divorce can move more quickly. Learn more in how quickly can I get a divorce in Maryland and how to file an uncontested divorce in Maryland. Court schedules fill up at the end of the year, so if a divorce before year-end is your goal, start now.
Year-End Tax Checklist for Divorcing Couples
- ☐ Talk with a CPA about which filing status saves you the most
- ☐ Update your W-4 withholding with your employer
- ☐ Decide who will claim the children, and put it in writing
- ☐ Review estimated tax payments if you have self-employment income
- ☐ Gather tax returns, pay stubs and account statements
- ☐ Update beneficiaries on retirement accounts and life insurance once your divorce is final
- ☐ Review your estate plan
The IRS also shares helpful reminders in tax considerations for people who are separating or divorcing.
Frequently Asked Questions
If my divorce is final on December 31, am I single for the whole year?
Yes. For federal tax purposes, your status on the last day of the year applies to the entire year.
Can I file jointly with my spouse if we’re separated?
Yes, if you’re still legally married on December 31 and you both agree. Keep in mind that you’re both responsible for the accuracy of the return and any tax owed.
Is alimony taxable in Maryland?
For federal purposes, alimony under agreements signed after 2018 isn’t taxable or deductible. Talk with a tax professional about how your specific agreement is treated.
Who claims the kids after divorce?
Generally the custodial parent. Parents can agree otherwise, and the custodial parent can release the claim using IRS Form 8332.
Plan Ahead for a Drama-Free New Year
Deciding when to finalize your divorce is a financial decision as much as a legal one. Jacobson Family Law helps couples reach clear, thoughtful agreements with flat-fee pricing and a calm, respectful process, so you can start the new year with confidence.
