Divorce doesn’t just affect your relationship—it affects nearly every part of your financial life. And one of the most overlooked yet critically important areas is taxation. From how alimony is taxed to who gets to claim the children as dependents, the tax implications of divorce in Florida are far-reaching and can cost you thousands if you aren’t careful.
While your Tampa divorce lawyer will protect your legal rights during the process, understanding how your divorce affects your taxes is essential for protecting your financial future. In this article, we’ll explore how divorce changes your tax obligations, outline common tax pitfalls, and explain how proper legal guidance can help you avoid costly mistakes.
How Divorce Affects Your Tax Filing Status
One of the first major tax changes you’ll experience is your filing status. In the year you get divorced, your marital status as of December 31st determines your filing options.
Filing as Single or Head of Household
If your divorce is finalized on or before December 31st, you can no longer file a joint return. Your options will be:
- Single: If you do not qualify as Head of Household
- Head of Household: If you paid more than half the cost of maintaining a home for a qualifying child
Filing as Head of Household typically comes with better tax brackets and a higher standard deduction. However, the IRS has strict rules about who qualifies, so work closely with your Tampa divorce lawyer and tax advisor to ensure your filing status is appropriate.
Still Married on December 31?
If you’re still legally married at the end of the year, you may still file:
- Married Filing Jointly
- Married Filing Separately
However, be cautious: filing jointly makes you jointly liable for all taxes owed. If your spouse underreports income or overclaims deductions, you could be on the hook. In high-conflict or high-asset divorces, it’s often safer to file separately.
Alimony and Taxes in Florida
One of the most misunderstood tax changes in recent years involves alimony. Prior to 2019, alimony was tax-deductiblefor the paying spouse and taxable income to the recipient. That’s no longer the case.
Current Rule: No Deduction, No Income
For divorce agreements executed on or after January 1, 2019, under the Tax Cuts and Jobs Act:
- Alimony is no longer tax-deductible for the payor
- Alimony is no longer taxable for the recipient
This means the person paying alimony is bearing a greater after-tax cost, and the recipient gets to keep the full amount without counting it as income.
As a Tampa divorce lawyer, I regularly help clients structure alimony in ways that consider this change. You should also understand:
- The new rule does not apply retroactively. If your alimony order was issued before 2019 and hasn’t been modified, the old tax rules may still apply.
- Modifying an old agreement after 2019 can trigger the new tax treatment—sometimes unintentionally.
Discuss any alimony modifications with your attorney and a tax professional before signing.
Child Support and Taxes
Unlike alimony, child support is not taxable income for the recipient and is not tax-deductible for the paying parent.
The IRS views child support as a non-taxable family obligation. This means it does not impact either party’s tax return directly—but it can affect other tax issues like the dependency exemption, Child Tax Credit, and Head of Household status.
Who Gets to Claim the Children?
A common point of contention in Florida divorce cases is who gets to claim the children as dependents for tax purposes. This can significantly impact your tax refund, credits, and deductions.
IRS Rules
The IRS allows the parent who has the child more than 50% of the time to claim the child as a dependent. However, a divorce decree or agreement can override this if both parties agree.
Your Tampa divorce lawyer can help you include language in your parenting plan that:
- Assigns the dependency exemption to one parent
- Alternates it each year
- Assigns one child to each parent (if multiple children are involved)
Tax Credits Tied to Dependents
The parent who claims the child may be eligible for:
- Child Tax Credit
- Child and Dependent Care Credit
- Earned Income Tax Credit
- Education Credits (e.g., American Opportunity Credit)
Assigning the exemption isn’t just about fairness—it’s about optimizing both parties’ tax outcomes.
Division of Property and Capital Gains Tax
Florida is an equitable distribution state, meaning marital assets are divided fairly—not necessarily equally. When dividing property, taxes should be a major consideration.
No Immediate Tax on Transfers
The IRS allows transfers of property incident to divorce without immediate tax consequences. This means if your spouse is awarded the family home or you’re given the rental property, no capital gains tax is owed at the time of transfer.
But here’s the catch: you may owe capital gains tax when you later sell the asset.
Primary Residence and Capital Gains Exclusion
If you sell your primary residence after divorce, you may qualify for the $250,000 capital gains exclusion ($500,000 if married filing jointly before the divorce).
To qualify, you must:
- Have owned the home for at least 2 years
- Have lived in it as your primary residence for 2 of the last 5 years
If one spouse moves out and the other stays, only the person who meets both tests gets the exclusion. This makes timing critical.
Your Tampa divorce lawyer should coordinate with a CPA to ensure that:
- Any planned sales are timed carefully
- The person receiving the property understands the tax impact of a future sale
Retirement Accounts and QDROs
Dividing retirement accounts during divorce carries major tax risks if done incorrectly. Assets like 401(k)s and pensions are marital property, but they must be divided using the right legal tools.
Qualified Domestic Relations Order (QDRO)
A QDRO is a special court order that allows a retirement plan administrator to divide a plan without triggering early withdrawal penalties or immediate taxes.
If you cash out retirement funds without a QDRO, you may face:
- 10% early withdrawal penalty if under 59½
- Ordinary income tax on the entire amount
A Tampa divorce lawyer with experience in QDROs can help you:
- Draft the proper order
- Coordinate with plan administrators
- Ensure tax-efficient division of accounts
IRAs and Tax Consequences
IRAs don’t require a QDRO, but they must still be handled correctly. The transfer must be:
- Made under a divorce decree
- Completed trustee-to-trustee
Failing to follow IRS procedures can lead to a surprise tax bill.
Tax Implications of Selling Assets in Divorce
Selling assets during divorce may create taxable events. Common examples include:
- Selling the marital home
- Liquidating investments
- Selling a business interest
- Cashing out retirement
Each of these actions can trigger capital gains taxes, depreciation recapture, or ordinary income tax.
A skilled Tampa divorce lawyer will evaluate whether:
- Assets should be divided or sold
- Tax liability can be minimized by timing
- Proceeds should be split before or after taxes
In high-asset divorces, working with a divorce-savvy CPA or financial advisor alongside your attorney is a smart move.
Hidden Tax Traps in Divorce Agreements
Some divorce agreements unintentionally create tax problems. Here are a few traps to avoid:
1. Not Addressing Tax Filing for the Divorce Year
Without clear language in the settlement, both parties may file the same child or claim Head of Household, leading to IRS audits and penalties.
2. Alimony That Looks Like Child Support
If alimony payments drop when a child turns 18, the IRS may reclassify them as disguised child support—which isn’t deductible for pre-2019 orders.
3. Unallocated Support
If your agreement doesn’t clearly define payments as alimony or child support, you may create confusion for the IRS.
4. Failure to Consider Carryforward Losses or Credits
Some couples forget to divide carryforward capital losses or tax credits from joint filings. Your Tampa divorce lawyer can help ensure these benefits are shared fairly.
Planning Ahead: Tax Strategy After Divorce
Divorce changes your entire financial profile. Planning ahead can reduce your tax burden and set you up for a stable future.
Post-Divorce Checklist
- Update your W-4 withholding
- Meet with a tax advisor for estimated payments
- Review your new filing status
- Adjust your retirement contributions
- Retitle assets and update cost basis information
- Secure your own CPA or financial planner
Your Tampa divorce lawyer may recommend financial experts who regularly assist newly divorced clients.
Special Considerations for Business Owners
If you or your spouse owns a business, the tax implications can be even more complex.
Dividing business interests may involve:
- Valuation disputes
- Buyout payments
- Capital gains on sale of business shares
- Pass-through income issues for S-corporations or partnerships
You’ll also need to consider:
- Who claims the business income after divorce?
- How are distributions treated for tax purposes?
- Will the IRS view a lump-sum buyout as a taxable event?
High-net-worth individuals and entrepreneurs should work closely with both their Tampa divorce lawyer and tax professionals to avoid severe financial consequences.
Frequently Asked Questions
Can I claim Head of Household if I’m divorced and my child lives with me?
Yes, if you pay more than half the cost of maintaining the household and the child lives with you for more than half the year. You must also be unmarried on December 31st.
Who claims the children as dependents after divorce?
By default, the parent with primary custody claims the children. However, a divorce agreement can specify which parent claims the children or alternate years.
Is alimony taxable in Florida?
No. For divorces finalized on or after January 1, 2019, alimony is not taxable to the recipient and not deductible by the payor.
Do I owe tax on property received in the divorce?
Not immediately. Transfers incident to divorce are non-taxable. However, you may owe capital gains taxes if you sell the property later.
How are retirement accounts divided without tax penalties?
401(k)s and pensions require a QDRO. IRAs can be divided under a divorce decree if the transfer is done trustee-to-trustee.
Do I have to pay capital gains if we sell the house after divorce?
Possibly. If you qualify for the $250,000 exclusion (or $500,000 if married), you may avoid gains. However, timing and primary residence rules apply.
Can my ex-spouse claim me as a dependent?
No. Once divorced, you are no longer a dependent for tax purposes. Only children and qualifying relatives may be claimed.
What if I file a joint return but my spouse made errors?
You may be eligible for Innocent Spouse Relief if you can prove you didn’t know or benefit from the errors. Talk to your Tampa divorce lawyer and a tax professional.
Can we split tax refunds after divorce?
Yes. Your divorce agreement can specify how to divide refunds from prior joint filings. If not addressed, you may have to negotiate or litigate the issue.
Should I get a new CPA after divorce?
It’s often a good idea. A new CPA provides a fresh, confidential relationship focused solely on your financial interests moving forward.
Divorce is already hard enough—don’t let tax mistakes make it worse. At The McKinney Law Group, we help our clients understand how every aspect of their divorce impacts their finances, including taxes. Whether you’re dealing with complex alimony, asset division, business interests, or child-related tax questions, we work closely with tax professionals to make sure you’re protected.
If you’re concerned about how your divorce may affect your tax liability or want to make sure your settlement is structured in a way that avoids surprises, our experienced team of Tampa divorce lawyers is here to guide you. Contact us today to schedule a consultation and secure your financial future.
The McKinney Law Group: Divorce Advocacy for Tampa Clients Starting Over
Whether you’re ending a short marriage or navigating a life-changing split after decades, we’re here to help. At The McKinney Law Group, we support Tampa clients in building a strong legal foundation as they transition into a new chapter.
We assist with:
✔ Equitable property and debt division
✔ Support for re-entering the workforce or downsizing finances
✔ Long-term spousal support and retirement planning
✔ Real estate and home ownership concerns during divorce
✔ Practical, empowering legal strategies for your fresh start
When it’s time to move on, we’ll help you do it the right way.
Call 813-428-3400 or email [email protected] to get started.