Pub 504, Divorced or Separated Individuals: Filing, Alimony, Relief

IRS Publication 504 is the federal guide to how taxes change when a marriage ends, covering filing status, who claims the children, alimony and child support, dividing property and retirement accounts, and relief from a former spouse’s tax debts. The rules shift in the year of separation and again in the year the divorce is final, and small procedural mistakes, like handing your ex cash from your own IRA instead of moving it through a direct transfer, can turn a tax-free split into a taxable event. What follows is what the publication says on each of those points, in the order most people run into them.

Your Filing Status Depends on December 31

Your marital status on the last day of the year controls your filing status for the entire year. A divorce finalized on New Year’s Eve makes you unmarried for that whole tax year; a decree entered on January 2 leaves you married for the year that just ended, even after months of living apart. An interlocutory decree or a pending case does not count. Without a final decree of divorce or separate maintenance by December 31, you are still married in the eyes of the IRS, no matter how the household actually looks.¹

Once you know whether you are married or unmarried on that date, four statuses are potentially in play: Single, Married Filing Jointly, Married Filing Separately, and Head of Household. The choice can swing a return by thousands of dollars, because the standard deduction alone differs sharply by status. For tax year 2026, Single and Married Filing Separately each get $16,100, Head of Household gets $24,150, and Married Filing Jointly gets $32,200.²

When You Can File as Head of Household

Head of Household usually beats Single or Married Filing Separately for a parent with primary custody, because it carries lower rates and a bigger standard deduction. Three tests must all be met. You must be unmarried or considered unmarried on December 31; if still legally married, you qualify as considered unmarried when your spouse did not live in your home during the last six months of the year and you file a separate return. You must have paid more than half the cost of keeping up your home for the year, including rent or mortgage interest, property taxes, insurance, utilities, repairs, and food eaten in the home. And a qualifying person, usually your child, stepchild, or foster child, must have lived with you more than half the year, with temporary absences for school or vacation not breaking residency.³

One detail catches people off guard: you must be able to claim the child as a dependent to be Head of Household, but you still pass this test even after releasing the dependency to the other parent on Form 8332.³

What You Lose by Filing Separately

If you are still legally married and joint filing is off the table, Married Filing Separately is the most restrictive option. Filing separately disqualifies you from the Earned Income Tax Credit if you lived with your spouse at any time during the year. You lose the American Opportunity Credit, the Lifetime Learning Credit, and the student loan interest deduction. The Child and Dependent Care Credit is unavailable in most cases, and the dependent care assistance exclusion drops from $5,000 to $2,500.⁴

There is also a forced-consistency rule. If one spouse itemizes, the other must itemize too, even when the standard deduction would be larger. That prevents one spouse from itemizing while the other takes the full standard deduction on the same set of expenses.⁵

Claiming the Children and the Credits That Follow

Which parent claims a child controls access to several valuable credits, and this is often the most contested tax issue in a divorce. The default rule is simple. The custodial parent, meaning the parent the child spent more nights with during the year, claims the child.¹

The custodial parent can release the claim to the other parent by signing Form 8332. The noncustodial parent then attaches that form to their return for every year they claim the child. A release can cover a single year, several specified years, or all future years, and the custodial parent can revoke a multi-year release using Part III of Form 8332. A divorce decree by itself does not transfer the claim. Even if the court order awards the noncustodial parent the right to claim the child, the IRS requires Form 8332 or a substantially similar written declaration signed by the custodial parent.⁶

What a Signed Form 8332 Transfers

The release moves the Child Tax Credit and the Credit for Other Dependents to the noncustodial parent. For tax year 2025, the Child Tax Credit is worth up to $2,200 per qualifying child under 17, with up to $1,700 refundable as the Additional Child Tax Credit. The credit phases out starting at $200,000 of income for Single or Head of Household filers and $400,000 for joint filers.⁶

What Stays With the Custodial Parent

Several benefits do not travel with Form 8332 no matter what a divorce agreement says. Head of Household filing status stays with the custodial parent. The Earned Income Tax Credit for a qualifying child belongs exclusively to the parent who meets the residency test. The Child and Dependent Care Credit stays with the custodial parent as well, because it is tied to who actually pays for care while the child lives with them.¹

Medical expenses work differently. Either parent can deduct medical expenses they pay for a child, even if the other parent claims the child as a dependent, provided the child was in the custody of one or both parents for more than half the year and received over half of their support from the parents. The parents must be divorced, legally separated, separated under a written agreement, or have lived apart during the last six months of the year.⁷

Alimony and Child Support

How alimony is taxed depends entirely on when the divorce or separation agreement was executed. The Tax Cuts and Jobs Act set a hard dividing line at January 1, 2019.

For any agreement executed after December 31, 2018, alimony is neither deductible by the payer nor income to the recipient. The payer sends after-tax dollars, and the recipient reports nothing. The same rule applies to a pre-2019 agreement modified after 2018, but only if the modification specifically states that the new treatment applies.⁸

Agreements executed before January 1, 2019, still follow the older rules. The payer deducts alimony on Schedule 1 of Form 1040, and the recipient includes the full amount in gross income. That treatment continues unless both former spouses agree in a written modification to switch.⁸

Under either version of the rules, a payment qualifies as alimony only if it is made in cash (including checks or money orders), paid to or on behalf of a former spouse under a divorce or separation instrument, and not designated in the agreement as something other than alimony. The former spouses cannot be living in the same household when the payment is made, and the obligation must end at the recipient’s death. Payments made to third parties on your ex-spouse’s behalf, such as mortgage or health insurance premiums the agreement requires you to cover, are treated the same as direct cash payments if they meet the other requirements.¹

Child support is different. It never changes tax hands, regardless of when the agreement was executed. The payer cannot deduct it, and the recipient does not report it.⁹ Labels in the agreement do not control the outcome. If a payment called “alimony” drops when a child turns 21, graduates, or dies, the IRS treats the reduced portion as child support all along.¹

Dividing Property Without Triggering Tax

Splitting assets in a divorce does not itself create a tax bill. Under Section 1041 of the Internal Revenue Code, no gain or loss is recognized when property is transferred to a spouse or former spouse incident to divorce. The transfer qualifies if it happens within one year of the marriage ending, or if it is made under a divorce or separation instrument within six years after the marriage ends.¹⁰

The trap is basis. The receiving spouse takes the original owner’s tax basis, not the current fair market value. Stock your ex bought for $10,000 that is worth $100,000 when transferred to you gives you a basis of $10,000. When you sell, you owe tax on $90,000 of gain. Two assets with the same market value at the settlement table can carry very different embedded tax bills, and a fifty-fifty split by market value is not a fifty-fifty split after tax.

Selling the Marital Home

When the family home is sold, each spouse can exclude up to $250,000 of gain from income if they meet the ownership and use tests, meaning they owned and used the home as their principal residence for at least two of the five years before the sale. If the home is sold while the couple is still married and filing jointly, the combined exclusion is $500,000, provided at least one spouse meets the ownership test and both meet the use test.¹¹

A common scenario worries the spouse who moves out. One spouse stays in the home for several years after the separation, and the house is not sold until later. The spouse who left may look like they no longer meet the use test. Section 121 handles this. If the divorce or separation agreement grants the remaining spouse use of the home, the spouse who moved out is treated as continuing to use it as their principal residence during that period. Both spouses’ exclusions stay alive for the eventual sale.¹¹

Splitting Retirement Accounts

Retirement accounts have their own procedures, and the wrong procedure creates immediate tax and a possible 10% early withdrawal penalty. The right procedure moves the money tax-free.

Dividing a 401(k), pension, or other employer-sponsored plan requires a Qualified Domestic Relations Order. A QDRO is a court order directing the plan administrator to pay a portion of the participant’s benefits to an alternate payee, typically the former spouse. The order must include each party’s name and mailing address, the amount or percentage to be transferred, and the number of payments or time period covered.¹²

A former spouse who receives funds through a QDRO can roll them directly into their own IRA or eligible retirement plan with no immediate tax. Cash distributions taken instead are taxed as ordinary income. The critical benefit of the QDRO route is that the 10% early withdrawal penalty that normally applies before age 59½ does not apply to distributions to an alternate payee under a QDRO.¹²

IRAs do not use QDROs. The transfer must be made directly from one IRA to the other through a trustee-to-trustee transfer, or under a divorce or separation decree. Done correctly, it is tax-free, and the receiving spouse then owns the IRA outright and is responsible for taxes on future withdrawals. If you instead withdraw from your own IRA and hand the money to your ex-spouse, even because the divorce agreement says to, the IRS treats that as your taxable distribution.¹³

Relief From a Former Spouse’s Tax Debts

A joint return makes both spouses jointly and individually liable for the entire tax on that return, and the liability survives divorce. If a former spouse underreported income, claimed deductions that were not allowed, or simply did not pay what was owed, the IRS can pursue you for the full amount. Three types of relief exist under Publication 504’s framework, and they cover different situations.

Innocent Spouse Relief

This applies when a joint return has an understatement of tax caused by your former spouse’s errors. You must show that you did not know, and had no reason to know, about the understatement when you signed the return. You generally must file Form 8857 within two years after the IRS first begins collection efforts against you for the disputed liability.¹⁴

Separation of Liability

If you are now divorced, legally separated, or have not lived with your former spouse for at least 12 months, you can ask the IRS to split the joint deficiency between you based on which spouse was responsible for each item that caused the underpayment. You are only responsible for your share. The same two-year filing deadline applies.¹⁵

Equitable Relief

Equitable relief is the fallback when you do not qualify for the first two. It is also the only form of relief that covers underpayments, meaning the return was correct but the tax was not actually paid. The IRS weighs factors such as your current financial situation, whether you benefited from the unpaid tax, and whether your former spouse abused you or controlled the household finances. Equitable relief has no two-year deadline. You generally have until the IRS’s 10-year collection statute expires for a balance due, or the normal refund deadline for an overpayment.¹⁴

Injured Spouse Is a Different Problem

Innocent spouse relief is often confused with injured spouse relief, but they address different situations. Injured spouse relief applies when your share of a joint refund is seized to pay your spouse’s separate debts, such as past-due child support, defaulted student loans, or back taxes from before the marriage. You use Form 8379 to recover your portion. It has nothing to do with errors on the return.¹⁵

Update Your Withholding After the Split

Submit a new Form W-4 to your employer within 10 days of the divorce or separation. Withholding set up under married status will almost always leave you short at filing time once you are Single or Head of Household.¹

If you receive alimony under a pre-2019 agreement, that income is taxable and has no withholding, so quarterly estimated payments may be needed to avoid an underpayment penalty. If you and your spouse made joint estimated tax payments during a year you now file separately, you can divide those payments however you both agree. If you cannot agree, each spouse’s share equals the total joint payments multiplied by the ratio of that spouse’s individual tax to the couple’s combined tax.¹

One boundary worth flagging: divorce attorney fees and court costs are not deductible on your federal return. Publication 504 states that legal fees related to a divorce are not deductible, following the Tax Cuts and Jobs Act’s suspension of the earlier deduction for fees tied to tax advice or obtaining taxable alimony.¹

1
Internal Revenue Service. Publication 504 (2025), Divorced or Separated Individuals
2
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill
3
Internal Revenue Service. Publication 504 (2025), Divorced or Separated Individuals – Section: Requirements
4
Internal Revenue Service. Filing Status
5
Internal Revenue Service. Itemized Deductions, Standard Deduction
6
Internal Revenue Service. Form 8332 – Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent
7
Internal Revenue Service. Publication 502, Medical and Dental Expenses
8
Internal Revenue Service. Topic No 452, Alimony and Separate Maintenance
9
Internal Revenue Service. Alimony, Child Support, Court Awards, Damages 1
10
Office of the Law Revision Counsel. 26 USC 1041 – Transfers of Property Between Spouses or Incident to Divorce
11
Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
12
Internal Revenue Service. Retirement Topics – QDRO Qualified Domestic Relations Order
13
Internal Revenue Service. Filing Taxes After Divorce or Separation
14
Internal Revenue Service. Instructions for Form 8857
15
Internal Revenue Service. Tax Relief for Spouses