Taxes During and After a Divorce: What SC Spouses Should Know

Reviewed by Carrie Warner, Attorney at Law, SC Bar No. 72836 · Last reviewed November 2, 2026

Divorce changes your taxes in several ways: your filing status, how alimony is treated, who claims the children, and what happens when the house or retirement accounts are divided. Your filing status for a year depends on whether you are married on December 31. Most property transfers between spouses as part of a divorce are not taxable when they happen, but they can carry tax consequences later. This guide covers the main issues. Talk to a tax professional about your own return.

Filing Status: Married on December 31?

According to IRS Publication 504, your filing status depends on your marital status on the last day of the tax year. If your final decree is entered by December 31, you are considered unmarried for that whole year. If you are separated but not yet divorced, you are still married for tax purposes, even if you have lived apart for months.

Separation alone does not change your status. In South Carolina, a no-fault divorce requires a year of separation, so many couples file at least one tax return while separated but still married. Our one-year separation rule guide explains that timeline.

Joint or Separate Return While Still Married

Spouses who are still married at year-end can choose to file jointly or separately.

• Married filing jointly often produces a lower combined tax, but both spouses are generally responsible for the full tax, interest and penalties on that return, even after divorce.
• Married filing separately keeps each spouse responsible only for their own return, but it often means a higher total tax and the loss of some credits. If one spouse itemizes, the other cannot take the standard deduction.

If you do not trust your spouse’s reporting, filing separately may be worth considering. A temporary order or written agreement can address how a joint refund or balance due will be shared. Your financial records should include several years of returns.

Head of Household While Separated

A married person can sometimes file as head of household if they are “considered unmarried.” Under IRS rules, you generally must:

1. File a separate return
2. Pay more than half the cost of keeping up your home for the year
3. Not have your spouse live in your home during the last six months of the year
4. Have your home be the main home of your qualifying child for more than half the year

Head of household status usually has a larger standard deduction and better rates than married filing separately. The timing of when a spouse moves out can affect whether this is available, which is one more reason to think through whether and when to move out.

Alimony After the 2017 Tax Law

For divorce or separation instruments executed after December 31, 2018, alimony is not deductible by the payor and is not taxable income to the recipient under federal law. Instruments executed before 2019 keep the older treatment (deductible to the payor, income to the recipient) unless they are later modified and the modification expressly adopts the new rule.

Under S.C. Code § 20-3-130(F), the family court may determine the intended tax effect of alimony as provided by the Internal Revenue Code. Tax consequences are also one of the alimony factors in § 20-3-130(C). If you are modifying an older order, ask how a change could affect the tax treatment. See alimony and taxes for more.

Child support is not deductible by the payor and is not income to the recipient.

Who Claims the Children

For federal tax purposes, the custodial parent (generally the parent the child lived with for more nights during the year) is usually the one who may claim the child. The custodial parent can release the claim to the noncustodial parent by signing IRS Form 8332.

A signed Form 8332 lets the noncustodial parent claim the child tax credit, the additional child tax credit and the credit for other dependents. According to the IRS, it does not transfer other benefits, such as head of household status, the earned income credit or the dependent care credit.

Section 20-3-130(F) also allows the family court to allocate the right to claim dependency exemptions and to require the parties to sign the documents needed. Agreements commonly alternate years or assign specific children to each parent, and sometimes condition the claim on support being current. Put the terms in writing and require Form 8332 to be signed by a set date.

Transfers of Property Between Spouses

Generally, no gain or loss is recognized when property is transferred to a spouse or former spouse incident to divorce. IRS Publication 504 says a transfer qualifies if it occurs within one year after the marriage ends, or if it is related to the end of the marriage, which generally means made under the divorce instrument and within six years.

“Not taxable now” is not the same as “never taxed.” The spouse who receives property generally takes over the original tax basis. Two assets with the same market value can have very different after-tax value. For example, a brokerage account with large unrealized gains may be worth less after taxes than the same dollar amount in cash. Our page on equitable distribution discusses how tax consequences are one of the factors the court weighs.

Selling the Marital Home

Federal law allows many homeowners to exclude a gain on the sale of a main home, up to $250,000 for a single filer or up to $500,000 for a married couple filing jointly, if ownership and use tests are met. IRS Publication 523 includes special rules for separated and divorced owners. The timing of a sale, before or after the decree, can affect which limit applies, so check with a tax professional before listing the house.

Retirement Accounts

Retirement plans covered by ERISA, such as most 401(k)s and pensions, are divided through a qualified domestic relations order, or QDRO. A transfer of an IRA to a spouse or former spouse under a divorce decree or related written instrument is not considered a taxable transfer. A spouse who later withdraws money will generally owe income tax on it, and special rules may apply to early withdrawals. Read more in QDROs in South Carolina divorce.

Innocent Spouse Relief

If you filed joint returns and later learn your spouse understated income or claimed improper deductions, you may be able to ask the IRS for relief from joint liability. Requests are made on IRS Form 8857. The IRS offers several types of relief, each with its own requirements and time limits, so act promptly if you think this applies. IRS Publication 971 explains the options.

Tax Checklist for Your Divorce

• Gather at least three years of federal and state returns.
• Decide, with advice, how to file for the current year.
• Address who claims each child and require Form 8332 where needed.
• Ask about basis and future taxes on each asset you are receiving.
• Confirm how any pre-2019 alimony order is treated.
• Update your W-4 withholding after the divorce.

For more on money and property, return to the South Carolina Divorce Guide.

Frequently Asked Questions

Can I file as single if we are separated?

No. If you are still legally married on December 31, you must file as married filing jointly, married filing separately, or head of household if you qualify as considered unmarried.

Is alimony taxable in South Carolina?

Under federal law, alimony under instruments executed after 2018 is not deductible by the payor or taxable to the recipient. Older instruments generally keep the prior treatment.

Who gets to claim the children?

Generally the custodial parent, unless that parent signs Form 8332. The family court may also allocate the right to claim the children.

Is it taxable when my spouse transfers the house to me?

Transfers between spouses incident to divorce generally are not taxable when made, but you usually take over the original basis, which matters when you sell.

What if my spouse lied on our joint return?

You may be able to request innocent spouse relief from the IRS on Form 8857. Time limits apply.

Sources

• IRS Publication 504, Divorced or Separated Individuals
• IRS Publication 523, Selling Your Home
• IRS Publication 971, Innocent Spouse Relief
• IRS Form 8332
• S.C. Code Title 20, Chapter 3 (§ 20-3-130)