How to File Taxes after a Divorce in Utah

• Steps for filing taxes in Utah after a divorce
• How to determine your tax filing status after divorce
• What is a custodial parent designation?
• Child support, alimony, and tax implications in Utah
• Division of assets in Utah
• Tax credits
• Legal fees and settlements
• Change of name
• Different ways to file your taxes after a divorce in Utah
• References

After a divorce in Utah, most of how you file your taxes will remain the same. What’s going to change is your filing status and, potentially, the tax credits for which you’re eligible. 

Broadly, divorce usually negatively impacts your taxes. It’s important to understand how your finances have changed to minimize its impact and claim all the credits and deductions you can.

Steps for filing taxes in Utah after a divorce

To file your taxes in Utah, you will need to prepare both your state and federal tax return. Much of this process remains unchanged after a divorce. But individual elements, such as your tax status and the deductions you can claim, are likely to change. Some changes that occur after a divorce may have significant tax implications (usually for the worse). 

If you’re unsure about the particulars of filing your taxes, know that the IRS has a huge pool of resources for taxpayers to use, for free, to get relevant advice. Tax software, including the free software many people can use (provided by the IRS), and tax experts can also help simplify the process. The IRS tool makes it clear what needs to be filled out on a step-by-step basis. 

What you need

Properly filing your taxes often requires you to collect a significant amount of documentation. You will need all relevant financial documents for the tax year, including W-2s from employers, 1099 forms for other income, and 1098 forms for mortgage interest deductions. 

Ultimately, you need documentation showing exactly how much money you made in the year from all sources. Make sure you focus on the actual tax year. Documents that are too old or new likely won’t be relevant. (However, it’s a good idea to store them for future use, in case you need them.)

Additionally, have your Social Security number ready as well as any other relevant identification numbers, including the identifying information of any dependents you will be claiming. Collect the records required for any tax credits or deductions, such as records showing your education expenses or charitable donations.

How to determine your tax filing status after divorce

As mentioned, the IRS provides a free tool to help people determine their tax status. This is worth using if you’re unsure. 

For the tax year in which your divorce was finalized, you are likely required to change your filing status. (Note that the year in question may be different from the tax year in which you first began your divorce process.) The only exception is if you remarry that same tax year. It’s rare, but it does happen.

For most people, their tax filing status will change to single. This is the typical status of an unmarried person.

However, some people will qualify as a head of household. This can be a more beneficial tax status. You may qualify if you pay most of a home’s expenses and have a dependent whom you claim in that same tax year. If you think this might apply, it’s worth using the IRS tool we mentioned to verify that you are eligible for a better tax status.

What is a custodial parent designation?

A child’s custodial parent is the one with whom they spend the most nights per year. Their non-custodial parent is their other parent, even if they also spend significant time with that person.

The “custodial parent” status is relevant to your taxes because only one parent can claim a child as a dependent in a given tax year. By default, this person is the custodial parent. Why? The parent who spends the most time caring for the child is thought to be the one who contributes more resources to that child.

However, some divorced couples have an agreement that allows them to do things differently. For example, some divorced parents agree to alternate years, or take turns, claiming a child as a dependent. In so doing, they share the tax benefits the child provides rather than having just one parent get this benefit every year. (Note: This can occur even if primary custody doesn’t alternate.)

Child support, alimony, and tax implications in Utah

Child support payments aren’t considered tax-deductible on the state or federal level. In other words, child support payments you might receive are not considered taxable income.

Alimony is a more complex issue. This is primarily because of the Tax Cuts and Jobs Act (TCJA). This act (among many other changes) declared that divorces finalized after December 31, 2018 fall under different rules than those finalized before that date. 

• A divorce finalized before the cutoff is more beneficial to the one who pays spousal support. Alimony payments are considered tax-deductible for these people, and receiving alimony payments is considered to be receiving taxable income. 
• Divorces finalized after the cutoff work differently. Alimony payments aren’t tax deductible for these people. If you receive alimony, in this case, it is not considered to be taxable income.

Division of assets in Utah

Dividing marital assets doesn’t have tax implications. However, selling marital assets so the money can be split between two exes can have tax consequences. 

Selling your assets potentially exposes you to capital gains tax. This is a tax on the profits you make from selling your assets. It’s common for people in higher income brackets to deal with capital gains tax, but many mid-income and low-income people are less familiar with it.

Here is an example. Very commonly, a divorcing couple will sell their marital home and split the money rather than try to divide the property through another means, such as a buyout. This can result in hundreds of thousands of dollars (or more) in taxable income, depending on the profits from the sale.

However, an important exception exists. Many parties are eligible for a major exclusion on the profits from the sale of a family home. You could potentially exclude $250,000 in profits (or $500,000, if you are married and filing jointly) from the sale. 

To qualify for the maximum exclusion, the following must typically be true:

• You didn't sell another home during the two years before the date of sale.
• You owned the home for at least two out of the last five years.
• You owned the home and used it as your residence for at least two of the past five years.

Tax credits 

Many tax credits and deductions are available to eligible individuals. Getting divorced may change your eligibility for these things. For example, if a divorce impacts your income, you may qualify for an Earned Income Tax Credit that you didn’t qualify for before.

Here’s another example. If you have a child in your care, you may qualify for a Child Tax Credit. The child must meet the necessary qualifications, including the following:

• The child is under 17. 
• The child doesn’t provide you with significant financial support. 
• You claim the child as a dependent. 
• The child is a U.S. citizen, U.S. national, or U.S. resident alien.

If your health insurance has changed, you might also be eligible for the Premium Tax Credit. To check if you qualify, we recommend using the link above. The IRS has a free guide and accompanying tool for this purpose. 

Legal fees and settlements 

The TCJA also altered the law regarding what types of legal fees can be claimed as tax-deductible. Today, most legal fees you might incur as part of the divorce process won’t be considered tax-deductible. However, some expenses related to running a business or business taxation can be deducted, even if those fees are incurred as a result of getting divorced in Utah.

Change of name

Sometimes, a divorced person changes their legal name but does not properly update all of their official documents, such as their Social Security card. If the name you write on your tax return has changed, make sure your name change is reflected in all relevant places. Otherwise, you may experience delays or other issues with your taxes.

Don’t Forget to Notify These 19 Agencies after You Change Your Name

Different ways to file your taxes after a divorce in Utah

Utah allows taxes to be filed and paid online or through check or money order. If mailing your tax forms, the state asks that citizens do not mail cash with their return and do not staple anything to their return. 

Keep in mind when deciding how to file your taxes that filing and paying online is typically much faster. 

Tax software often makes filing and paying online easy, although it sometimes only allows you to do so at an added cost. A tax expert who prepares your taxes for you may also be able to file your taxes for you, if you so desire. 

References