Divorce marks a new beginning—but it can also bring a host of financial questions, especially around tax time. From understanding your filing status to managing alimony, child tax credits, and home sales, knowing the rules can help you avoid costly mistakes. Based on insights from Kiplinger, we’ve outlined key 2025 tax tips to help newly divorced individuals navigate this transition with confidence.

Choosing Your Filing Status

Your marital status on December 31 determines how you’ll file for the entire year. If your divorce isn’t final by then, you may still file jointly—which can offer tax benefits—or opt for “married filing separately.” Once your divorce is finalized, or if you're living apart and meet certain criteria, you may qualify as “head of household,” which comes with a higher standard deduction and can offer a more favorable tax bracket. A tax professional can help you select the best option for your situation.

Alimony Rules Have Changed

If your divorce was finalized before December 31, 2018, alimony payments may still be deductible by the payer and taxable to the recipient. For divorces finalized after that date, the IRS no longer allows this deduction, and recipients don’t report the payments as income. If you're planning for retirement, alimony can sometimes be structured as a direct contribution to an IRA—traditional or Roth. And if you’re over age 50, you can take advantage of a $1,000 “catch-up” contribution to boost your retirement savings.

Selling the Family Home

If you owned and lived in your primary residence for at least two years, you can exclude up to $250,000 of capital gain from taxes. After a divorce, each spouse may be able to claim this exclusion on their separate returns. Didn’t meet the two-year requirement? A reduced exclusion may apply if the sale is tied to the divorce.

Claiming Children and Tax Credits

If your child lives with you for more than half the year, you’re generally entitled to claim the Child Tax Credit—worth up to $2,000 per child under 17. You may also qualify for a smaller credit for older dependents. In some cases, the noncustodial parent can claim a child, but this requires a signed waiver form from the custodial parent.

Medical Expenses for Children

Even if you're not the custodial parent, you may still be able to deduct unreimbursed medical expenses you paid for your child. To qualify, you’ll need to itemize your deductions and ensure those expenses exceed 7.5% of your adjusted gross income. Keep thorough records and receipts to support your claim.

Property Transfers

Concerned about taxes when transferring property to your ex-spouse? Don’t be—transfers made as part of a divorce settlement are generally non-taxable at the time of transfer. However, the recipient may face capital gains tax when selling the asset later, so it’s important to document the original value and date of transfer.

When facing these kinds of disputes, arm yourself with some of the top divorce attorneys in Bucks County, those who regularly work with financial and forensic experts needed in just such a case. If you have come to the point where you are considering divorce and want to protect your assets, contact Williams Family Law by phone at 215-340-2207, or email us at info@bucksfamilylawyers.com.