By Megan Thompson, CPA, CVA, CFF
One of the main points of financial confusion in the divorce process is the tax filing of the parties. While you are married, you can choose from two filing statuses, Married Filing Separately and Married Filing Jointly, with Married Filing Jointly being the most common. When you are separated, have children, and are living in different households, you also have the option to file Head of Household.
More detailed rules for the Head of Household filing status can be found on irs.gov, but in this scenario I am assuming we are talking about a minor child in a divorce. To claim Head of Household you have to have paid more than one-half the cost of keeping up the home in which you lived and in which the minor child also lived for more than half the year. Sometimes this can get tricky, because to qualify the parties have to be living separately for more than half the year and one party has to have more than 50% custody of the child.
If the parties were not separated until after June 30, or if the parties have equal custody of the child, technically neither party is eligible to file Head of Household. You can do some planning if there are two or more children and the parties would like to have equal custody. It can make financial sense to have each parent pick one child to have slightly more than a 50% of custody so that they can each potentially file as Head of Household. Of course, every situation is unique and you should always consult a tax professional when making any decisions regarding your tax filing status.
