5 Mistakes People Make on Their Taxes During and After Divorce

By Heather MacKenzie

Co-Founder & President

Last Updated: November 3, 2026

Published: February 05, 2024

Divorce Finance, Divorce Advice, Finances and Property, After Divorce, Taxes and Divorce

How getting divorced affects your taxes
Alimony changes
Splitting assets
5 mistakes to avoid during tax time
References

Your filing status changes, the question of who claims the children opens up, and the assets you divide carry tax consequences that do not show up until years later. Most tax trouble in divorce comes from treating one of those as settled when it is not.

How getting divorced affects your taxes

The date that matters for filing status is December 31. If your divorce is final on or before that date, the IRS treats you as unmarried for the whole year, and you file as Single or Head of Household. If it is not final, you are still married for tax purposes, and you and your spouse choose between Married Filing Jointly and Married Filing Separately for that year.

Neither choice is automatically better. Filing jointly usually produces a lower bill, and it also makes you both responsible for the entire return, including anything your spouse got wrong. If you have reason to doubt what your spouse is reporting, that matters more than the savings.

If you want to learn about Hello Divorce's certified divorce financial analyst (CDFA) services, including what a CDFA can do for you and how much it would cost to work with one, click here. While you're at it, feel free to schedule a free 15-minute call to learn about our CDFAs and other services.

Alimony changes

Alimony treatment depends on a date. For any divorce or separation instrument executed after 2018, alimony is not deductible by the person paying it and not taxable to the person receiving it, under the Tax Cuts and Jobs Act of 2017. Instruments executed before 2019 keep the older treatment, where the payer deducts and the recipient reports the payments as income, unless the order was later modified with language that expressly adopts the newer rule.

Unlike other parts of that 2017 law, this provision was never scheduled to expire, and the IRS states it with no end date. If someone in your negotiation is talking about the payer getting a deduction, find out which side of 2018 the original order falls on before you price anything around it.

Splitting assets

Property moved between spouses as part of a divorce is generally not taxed at the moment of transfer. The tax arrives later, when whoever received it sells.

This is why two assets of equal value on a spreadsheet can be worth very different amounts in real life. A brokerage account with a low cost basis and a house carrying a large unrealized gain are not interchangeable with cash, and a settlement that treats them as interchangeable hands one person a capital gains tax bill the other does not have.

5 tax mistakes to avoid in divorce

1. Failing to agree on your date of separation

The date of separation decides where the line falls between shared money and your own money. In community property states it is the date the marital community ends, so income earned after it is generally separate, and so are debts taken on after it. In equitable distribution states the date matters less for income reporting and more for valuing what gets divided.

The practical problem is simpler than the law. If you and your spouse report different separation dates, you report different income, and a mismatch between two returns is the kind of thing that generates a letter from the IRS. Settle the date in writing early. It is much harder to argue about once a return has been filed on it.

Inaccuracies about your date of separation could lead to confusion about what is communal and what is separate property and debt.

2. Failing to understand how a child actually gets claimed

The Tax Cuts and Jobs Act of 2017 eliminated the personal exemption for dependents and raised the child tax credit instead. The 2025 tax law made that permanent. The dependency exemption is not coming back, so any plan built around waiting for it to return in 2026 is built on nothing.

What replaced it is stricter than most divorcing parents expect. By default, the parent the child lived with for the greater number of nights during the year is the one who claims that child. A line in your decree saying the other parent gets to claim them does not accomplish this on its own. The custodial parent has to sign IRS Form 8332 releasing the claim, and the other parent attaches it to their return.

Here is the part that costs people money. Form 8332 releases the child tax credit. It does not release Head of Household status, the earned income credit, or the child and dependent care credit. Those stay with the parent the child actually lived with, and no agreement between the two of you changes that.

If your settlement traded away the right to claim your child in exchange for something else, it is worth finding out which benefits actually travelled with the trade and which ones never left.

A decree alone does not move the child tax credit. Ask your attorney whether Form 8332 was signed, for which years, and what it does and does not cover.

3. Failing to correctly change your name

If you are changing your name, the Social Security Administration has to know before the IRS does. The IRS matches the name on your return against Social Security records, and a mismatch will hold up your return and any refund.

Updating your driver's license and your social media is not the same thing. Start with Social Security, then your employer, your bank, and your retirement accounts. Your divorce decree is the document that proves the name change. Doing this in the wrong order is one of the easiest ways to turn a straightforward refund into a two-month wait.

Read our article, Don't Forget to Notify These 19 Agencies after You Change Your Name, for the entities that must be notified after you change your name.

4. Failing to properly split retirement funds

Taking money out of a retirement account before age 59 1/2 normally triggers income tax plus a 10% additional tax. Divorce has a way around the 10%, but only for the right kind of account, and this is where people get hurt.

For a workplace plan such as a 401(k) or a pension, the tool is a Qualified Domestic Relations Order. A QDRO directs the plan to pay part of the account to a former spouse, and a distribution made to that former spouse under a QDRO is exempt from the 10% additional tax. Income tax is still owed on anything actually taken as cash, so rolling it into another qualifying retirement account is what keeps it tax deferred.

An IRA does not work this way. QDROs do not apply to IRAs, and the QDRO exception to the 10% additional tax does not cover them. An IRA is divided by a transfer incident to divorce, made directly between the two institutions. Done that way it is not a taxable event. Done as a withdrawal and a handoff, it is income to the person whose name was on the account, plus the 10% if they are under 59 1/2. If your decree says QDRO and the account is an IRA, somebody needs to catch that before the money moves.

Need help with your QDRO? Our trusted partner, SimpleQDRO, can help.

5. Failing to file under the right status

Head of Household is better than Single for most people who qualify, because it carries a larger standard deduction and wider brackets. The requirements are specific, and people routinely assume they meet them.

You have to be unmarried, or considered unmarried, on the last day of the year. You have to have paid more than half the cost of keeping up your home for the year. Not half, and not most of it. And a qualifying person, usually a child, has to have lived with you for more than half the year, with an exception for temporary absences such as school.

That last requirement is the one that catches divorced parents. In a parenting schedule close to even, only one of you had the child for more than half the nights, and only that person can file as Head of Household. Both of you claiming it is an audit waiting to happen.

If your divorce involves a business, real estate with meaningful equity, retirement accounts spread across different plan types, or a parenting schedule close enough to even that nobody is sure who had more nights, an hour with a CPA or a Certified Divorce Financial Analyst costs less than finding out in April. The rules above are federal. Your state may treat some of this differently, particularly the separation date and how income is allocated between spouses in the year you divorce.