GroundSkill
Advise on marriage, divorce, carryovers, and filing-status trade-offs
Marriage, divorce, and loss carryovers meet on the same returns: status decides the rate column, property regimes split the income, agreement dates decide alimony, and unused losses carry into other years. This lesson runs those four decisions as one advisory sequence.
Status starts at year-end and works backward. Considered married covers the whole year when any of four tests holds on the last day: married living together, common-law marriage recognized in the relevant state, married living apart without a legal separation decree, or separated under a non-final decree. A final divorce decree by December 31 changes the answer for the entire year: unmarried for the whole year. In between sits the separated-but-not-divorced spouse, who is considered unmarried on the last day only by meeting every listed test — separate return, a home kept up at majority cost, an absent spouse for the last 6 months, and a qualifying child at home.
Community property adds a second factor in nine states: each spouse owns one-half of community income and expenses, so separate returns each carry half. Filing status never changes that split; it only chooses the columns the halves go into.
Tom and Ana, in a community property state, live apart after Tom leaves the home in September 2025 under no decree; Ana keeps the home with their child and files separately. For 2025 Tom and Ana are still considered married (living apart without a decree is test 3), so head of household through the considered-unmarried path fails — Tom lived in the home during the last 6 months of the year. Their $100,000 of community wages splits $50,000 each on separate returns. Had their divorce decree been final on December 15, 2025, both would be unmarried for the whole year instead.
Publication 17 Page 24
Considered married. You are considered married for the whole year if, on the last day of your tax year, you and your spouse meet any one of the following tests. 1. You are married and living together. 2. You are living together in a common law marriage recognized in the state where you now live or in the state where the common law marriage began. 3. You are married and living apart, but not legally separated under a decree of divorce or separate maintenance. 4. You are separated under an interlocutory (not final) decree of divorce.View on the source
Publication 501 Page 6
If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year.View on the source
Publication 971 Page 4
Generally, community property laws provide that you and your spouse are both entitled to one-half of your total community income and expenses.View on the source
Publication 504 Page 6
Considered unmarried. You are considered unmarried on the last day of the tax year if you meet all of the following tests.View on the source
Publication 555 Page 2
Married individuals. This publication is for married taxpayers who are domiciled in one of the following community property states. • Arizona. • California. • Idaho. • Louisiana. • Nevada. • New Mexico. • Texas. • Washington. • Wisconsin.View on the source
Rene and Pat were married and living together until a court issued a final divorce decree on October 20, 2025. Neither remarried by December 31, 2025. What is their marital status for 2025 filing purposes?
Alimony treatment depends on one date: December 31, 2018. Payments under an agreement entered on or before that day keep the classic paired treatment — deductible by the payer, includable by the recipient — unless a post-2018 change expressly provides the receipts are excluded. Payments under an agreement entered after that day get neither half: no deduction, no inclusion. The adviser's first question is therefore always the execution date of the instrument.
The second question is what the payments are. Even under a grandfathered agreement, five categories never count: child support, noncash property settlements, the spouse's share of community income, upkeep of the payer's own property, and use of the payer's property. A payer covering the mortgage on his own home where his spouse lives rent-free deducts nothing — the mortgage and the home are his. Property division itself travels a separate track: transfers incident to divorce (within 1 year after the marriage ends, or related to its end) carry nonrecognition — no gain or loss on the first transfer — rather than alimony treatment.
A grandfathered agreement has one more rule. When alimony payments decrease or end during the first 3 calendar years, the recapture rule can pull previously deducted amounts back: in the third year the payer includes part of the alimony previously deducted in income, and the recipient deducts part of the alimony previously included. Recapture applies when third-year alimony drops by more than $15,000 from the second year, or second- plus third-year alimony drops significantly from the first year. Both spouses figure the amount on Worksheet 1, which applies $15,000 floors and excludes temporary support orders, fixed income-share payments, and decreases caused by death or remarriage.
Rex pays $24,000 a year under a 2016 agreement, never modified: $18,000 labeled alimony plus $6,000 labeled child support. The $18,000 is deductible by Rex and includable by his ex-wife under the pre-2019 rule; the $6,000 is excluded from alimony by category. Had the same agreement been executed in 2021, the entire $24,000 would have no alimony treatment — Rex deducts nothing and his ex-wife includes nothing — while the $6,000 child support stays excluded from alimony either way.
Publication 504 Page 12
Alimony is deductible by the payer, and the recipient must include it in income if you entered into a divorce or separation agreement on or before December 31, 2018. Alimony paid is not deductible if you entered into a divorce or separation agreement on or before December 31, 2018, and the agreement is changed after December 31, 2018, to expressly provide that alimony received is not included in your former spouse’s income. Alimony paid is not deductible if you entered into a divorce or separation agreement after December 31, 2018.View on the source
Publication 504 Page 13
Alimony doesn’t include: • Child support, • Noncash property settlements, • Payments that are your spouse’s part of community income, as explained later under Community Property, • Payments to keep up the payer’s property, or • Use of the payer’s property.View on the source
Publication 504 Page 19
Incident to divorce. A property transfer is incident to your divorce if the transfer: • Occurs within 1 year after the date your marriage ends, or • Is related to the end of your marriage.View on the source
Publication 504 Page 19
You don’t recognize gain or loss on the first transfer. Instead, your spouse or former spouse may have to recognize gain or loss on the second transfer.View on the source
Publication 504 Page 16
If your alimony payments decrease or end during the first 3 calendar years, you may be subject to the recapture rule.View on the source
Publication 504 Page 16
When to apply the recapture rule. You are subject to the recapture rule in the third year if the alimony you pay in the third year decreases by more than $15,000 from the second year or the alimony you pay in the second and third years decreases significantly from the alimony you pay in the first year.View on the source
Publication 504 Page 17
* If you deducted alimony paid, report this amount as income on Schedule 1 (Form 1040), line 2a. If you reported alimony received, deduct this amount on Schedule 1 (Form 1040), line 19a.View on the source
Publication 504 Page 16
When you figure a decrease in alimony, don’t include the following amounts. • Payments made under a temporary support order. • Payments required over a period of at least 3 calendar years that vary because they are a fixed part of your income from a business or property, or from compensation for employment or self-employment. • Payments that decrease because of the death of either spouse or the remarriage of the spouse receiving the payments before the end of the third year.View on the source
Dan pays $1,500 per month in qualifying alimony under a separation instrument executed in 2017 that has never been modified. How are the 2025 payments treated?
Some deductions and credits cannot be used in one year and carry to another under their own rules. Carryovers are the general name for amounts that affect future or past returns, and each follows a specific rule and form:
| Item | Direction | Rule and form |
|---|---|---|
| Non-farming NOL (post-2020 year) | Forward | Form 172 mechanics; carryover equals NOL deduction minus modified taxable income, oldest NOL first; carried from a joint return to separate returns, each spouse's portion is separated out, and an NOL only one spouse had is all that spouse's |
| Farming-loss portion | Back 2 years | The sole carryback exception |
| Net capital loss | Forward | Schedule D; deduct $3,000 yearly ($1,500 MFS), carry the rest; joint carryovers follow the spouse who had the loss |
| Prior-year AMT credit | Forward | Form 8801 figures the credit and its carryforward |
| Negative QBI carryover | Forward | Carries forward as negative QBI when the suspending rule allows it |
| Excess charitable contributions | Forward | Schedule A percentage limits; Worksheet 2 applies the limits and computes the carryover |
Two more amounts carry forward. Charitable gifts that exceed the AGI percentage limits are not lost: Worksheet 2 applies the deduction limits, the deductible total lands on Schedule A, and carryover amounts not deductible this year move to next year — the excess usable in each of the next 5 years until it is used up. Likewise, a loss that would have counted in qualified business income but is suspended by another provision is tracked separately under that provision, and is included as negative QBI in a later year.
Two more rules apply: a decedent's unused capital loss is deducted only on the final return and never passes to the estate, and combining separate spouses' carryovers on a new joint return pools them going forward.
Single filer Kay ends 2025 with a $40,000 non-farming NOL and a $10,000 Schedule D net loss. The NOL carries forward in full (no post-2020 carryback for non-farming losses), absorbing future modified taxable income oldest-first. The capital loss deducts $3,000 against 2025 income with $7,000 carried to 2026 on Schedule D. Had Kay also paid AMT in 2024 on timing preferences, Form 8801 would figure the credit that also carries forward. Each amount follows its own rule and form.
Form 172 Instructions Page 2
If you have an NOL for a tax year ending after 2020, only the farming loss portion, if any, can be carried back.View on the source
Form 172 Instructions Page 2
Exception to the No Carryback Rule. Farming losses, defined next, qualify for a 2-year carryback period. Only the farming loss portion of an NOL can be carried back 2 years.View on the source
Form 172 Instructions Page 3
Joint to separate returns. If you and your spouse file separate returns for a tax year, but filed a joint return for any or all of the tax years involved in figuring the NOL carryover, figure each of your carryovers separately by separating the NOL portion for each spouse from within the joint return.View on the source
Form 172 Instructions Page 3
1. Figure each spouse's NOL as if he or she filed a separate return. See How To Figure an NOL, earlier. If only one spouse has an NOL, stop here. All of the joint NOL is that spouse's NOL.View on the source
Form 172 Instructions Page 4
Your carryover is the excess of your NOL deduction over your modified taxable income for the carryback or carryforward year. If your NOL deduction includes more than one NOL, apply the NOLs against your modified taxable income in the same order in which you incurred them, starting with the earliest.View on the source
Publication 550 Page 101
Limit on deduction. Your allowable capital loss deduction, figured on Schedule D (Form 1040), is the lesser of: • $3,000 ($1,500 if you are married and file a separate return), or • Your total net loss as shown on line 16 of Schedule D (Form 1040). You can use your total net loss to reduce your income dollar for dollar, up to the $3,000 limit. Capital loss carryover.View on the source
Publication 550 Page 102
If you and your spouse once filed a joint return and are filing separate returns for 2025, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss.View on the source
Form 8801 Instructions Page 1
Use Form 8801 if you are an individual, estate, or trust to figure the minimum tax credit, if any, for alternative minimum tax (AMT) you incurred in prior tax years and to figure any credit carryforward to 2026.View on the source
Publication 550 Page 103
A capital loss sustained by a decedent during the decedent’s last tax year (or carried over to that year from an earlier year) can be deducted only on the final income tax return filed for the decedent.View on the source
Publication 550 Page 103
The decedent's estate cannot deduct any of the loss or carry it over to following years.View on the source
Publication 550 Page 103
If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers.View on the source
Publication 526 Page 26
These steps are incorporated into Worksheet 2.View on the source
Publication 526 Page 28
Note: Any amounts in the carryover column are not deductible this year but can be carried over to next year.View on the source
Publication 526 Page 28
Enter the total here and include the deductible amounts on Schedule A (Form 1040), line 11, or line 12, whichever is appropriateView on the source
Publication 526 Page 28
you may be able to deduct the excess in each of the next 5 years until it is used up, but not beyond that time.View on the source
Form 8995 Instructions Page 8
must be tracked separately for purposes of determining the future amount includible as negative QBI.View on the source
Jordan, a sole proprietor with no farming income, has a 2025 net operating loss from the business. No election anomalies apply. Where does the NOL go?
The status choice trades tax against liability. Married filing jointly (MFJ) usually gives the lowest tax and needs both signatures, but it creates joint and several liability: each spouse owes the whole tax, including later-assessed amounts from the other's items, and no divorce decree reassigns that debt as far as the IRS is concerned. Married filing separately (MFS) fits two situations — doubting the spouse's reporting, or refusing responsibility for the spouse's shortfall — at the cost of higher tax and lost benefits. Head of household (HOH) falls between them for an unmarried (or considered-unmarried) taxpayer who pays more than half of keeping up a home for a qualifying person.
| Status | Tax cost | Liability | Signature |
|---|---|---|---|
| MFJ | Usually lowest | Joint and several; survives divorce decrees | Both spouses |
| MFS | Usually higher; some benefits lost | Separate | Each own return |
| HOH | Between, with the right household | Own only | Own return |
When several statuses are available, choose the one giving the lowest tax — after weighing the liability each choice carries.
Lena, married, paid 70% of keeping up the home for her daughter but lived with her husband all year. HOH is closed (she is considered married with no separation path), so the choice is MFJ against MFS. Filing jointly saves $2,100, but Lena knows her husband omits cash income. Recommending MFS costs the $2,100 while removing her from liability for his omission — the tradeoff the separate-filing guidance names. A signed postnuptial promise that he covers any tax would not change the IRS's collection rights.
Publication 501 Page 6
If more than one filing status applies to you, choose the one that will give you the lowest tax.View on the source
Publication 501 Page 7
You may want to file separately if: • You believe your spouse isn’t reporting all of their income, or • You don’t want to be responsible for any taxes due if your spouse doesn’t have enough tax withheld or doesn’t pay enough estimated tax.View on the source
Publication 501 Page 7
For a return to be considered a joint return, both spouses must generally sign the return.View on the source
Publication 501 Page 9
To qualify for head of household status, you must pay more than half of the cost of keeping up a home for the year.View on the source
Publication 971 Page 2
You remain jointly and severally liable for taxes, and the IRS can still collect them from you, even if you later divorce and the divorce decree states that your former spouse will be solely responsible for the tax.View on the source
Morgan believes her spouse is omitting side-business income and does not want responsibility for any tax on it. The couple is still married at year-end. Which filing recommendation fits?
The course asks you questions like these as you learn, brings back the ones you miss, and ends with full-length practice exams.
See the course Or take the free 12-question checkGroundSkill is independently produced and is not affiliated with or endorsed by the IRS. Sources last checked 2026-09-14. Exam preparation, not tax advice.