May 06, 2025
Written by Erb Legal LLC
Category: Divorce
330-446-3606Divorce is emotionally and financially challenging, and many separating couples don’t realize just how significantly their tax situation will change. Whether you’re finalizing your divorce or reviewing the terms of your settlement, it’s crucial to understand how the IRS views your new status. From filing status to dependency exemptions, the financial impact can linger long after the papers are signed.
Ohio divorce laws address how assets are divided and support is determined, but it’s the federal tax laws that govern what all that means for your return. With guidance from an experienced family law attorney, you can prepare for these financial shifts and protect your future stability.
Your marital status on December 31st of the tax year determines how you file. If you are legally divorced by that date, you cannot file jointly, even if you were married for most of the year.
You may have the option to file as Head of Household, which comes with better tax rates and a higher standard deduction than filing as Single. However, to do so, you must have a dependent living with you for more than half the year and meet other IRS criteria.
Consider this example: You finalized your divorce on December 30th, and your child lives with you. Even though you were married for nearly the whole year, you’ll file as Head of Household (if eligible) or Single. Your ex-spouse, meanwhile, may only qualify as Single.
One of the most significant sources of post-divorce conflict is the dependency exemption—specifically, who gets to claim the children. The IRS only allows one parent to claim each child per tax year.
In Ohio, courts may award the exemption to the custodial parent or allow parents to alternate years. However, even if the divorce decree exempts you, the IRS only recognizes it if the custodial parent (the one the child lived with more than half the year) signs Form 8332, releasing the claim to the other parent.
Tax credits associated with dependents, like the Child Tax Credit or Earned Income Tax Credit, can significantly affect your refund or what you owe. Failing to clarify who can claim the children and when can lead to rejected returns or audits.
A significant change under the Tax Cuts and Jobs Act of 2017 affects spousal support agreements made after January 1, 2019. If your divorce was finalized after that date, alimony payments are not tax-deductible for the payer and are not counted as income for the recipient.
This is a reversal from prior rules, where the paying spouse could deduct the payments, and the receiving spouse had to claim them as income. If you’re negotiating spousal support, this change should factor heavily into the discussion. It affects your net income, available deductions, and possibly your tax bracket.
Agreements made before 2019 may still follow the old rules—unless they were modified. Be sure to consult your attorney or tax professional if you’re unsure which rules apply.
Ohio is an equitable distribution state, meaning marital assets are divided fairly, but not necessarily equally. However, when it comes to taxes, not all assets are created equal.
For example, suppose you receive the family home in your divorce settlement. In that case, you may not owe taxes immediately, but selling the home later could result in capital gains tax if the sale exceeds certain IRS thresholds.
Similarly, transferring retirement accounts like IRAs or 401(k)s without using a Qualified Domestic Relations Order (QDRO) can trigger early withdrawal penalties and income taxes. Understanding the tax basis of each asset you receive is essential to making fair and informed choices during division.
Unlike spousal support, child support is neither taxable income for the parent who receives it nor deductible for the parent who pays it. It’s meant to cover the child’s needs, so the IRS treats it as a neutral transfer of funds.
Still, the way child support is structured in your divorce agreement could indirectly affect your taxes, especially if it interacts with other financial responsibilities like shared medical expenses or school costs.
Divorce isn’t just about separating lives—it’s about re-establishing your financial footing under new rules. The decisions you make now will impact your taxes for years to come. That’s why it’s critical to have a skilled Ohio family law attorney who understands the legal and financial implications.
Your attorney can help you:
The end of your marriage marks the beginning of a new chapter—and new financial responsibilities. At Erb Legal, we help individuals in Akron, Strongsville, and Medina navigate the complexities of divorce with confidence.
Let us help you avoid costly surprises at tax time and ensure your divorce agreement supports your long-term financial well-being. Call Erb Legal at 330-574-8862 or contact us online to schedule your consultation.
