Marriage, Divorce, and Taxes: Why December 31st 2015 is different than January 1st 2016

Getting married in 2015? Or considering finalizing your divorce in 2015? Your status makes a difference for your taxes.

The most important thing to remember is that your marital status on the last day of the year (December 31, 2015) determines your marital status for the entire year for the purposes of income tax filing.

Married in 2015?
First, let’s go over some of the IRS rules and benefits for all of those couples getting married this year.  
If you get married at any point in 2015, you are now required to file taxes either as married filing separately (MFS) or married filing jointly (MFJ) for any income you earn in 2015. What this means is that when you go to file taxes next April, you no longer have the option of filing as a single person.
For most couples filing a tax return as married filing jointly provides a beneficial tax outcome. Married couples filing a joint return can claim two personal exemptions instead of one and can use a standard deduction of $12,400 verses the single taxpayer deduction of $6,200. You can also choose to itemize your deductions for benefits like mortgage interest payments.
Another benefit of getting married this year is that spouses can give each other unlimited gifts without the gift tax limits.
All being said, the change in status is not necessarily a win for many professionals as the marriage penalty can start to impact your tax rate. You can determine if you are going to be impacted by the marriage penalty.  

Divorced in 2015
Under the IRS rules, your marital status on the last day of the year or December 31, 2015 determines your marital status for the entire year.
In California, the Court will not issue an official decree of divorce before 6 months from the date of filing and serving of the Petition for dissolution (California Family Code 2339). This means you need to start the process (file) before July 1st.
It is important to remember that most of the biggest taxable events are not necessarily part of the divorce process itself, but actually occur in the years that follow as a result of the divorce settlement, like the sale of a home, capital gains, and who will be able to claim the children as dependents. These won’t really be affected by whether you get divorced in 2015 or 2016.
Here are some common tax credits and exemptions that could impact your decision to file before June 30th, 2015, though:
 

Children
If you have children, one important tax issue to determine who will take the deductions for a dependent child. This is because the tax implications are important. For each dependent a parent can deduct $3,900 from their federal taxable income.  In order to qualify, the child must live with the parent claiming the exemption more than half of the year and be under the age of 19 at the end of the year. Often parents will alternate who gets to claim the exemption from year to year.

If you are able to get a final divorce decree by December 31, 2015 and file as single another benefit may be that one spouse can claim Head of Household. In order to qualify for this status, you and your ex must have lived apart for the last six months and the claiming parent also has to pay more than half of household costs. In this case, the other spouse files his/her return as single.

Mortgages
Another tax benefit to be aware of is the payment of mortgages.  The person who stays in the marital home may be able to take advantage of one of the most popular tax credits which is the mortgage interest deduction. The mortgage interest deduction is the part of your monthly payment that covers the interest you pay on the mortgage.

Property Taxes
The last issue to be aware of is property taxes. If both parties have made any estimated property tax payments this year, then you have two options. First, one party can claim all of the payments or second the payments can be divided between the parties pursuant to an agreement. These payments should be reflected on your tax return.
Tax issues can be complicated, especially when you are changing your filing status from married to single. Consult with a family law attorney and tax professional to make sure you are aware of the risks and benefits associated with changing your tax status.