Introduction

Divorce doesn’t just split up families and assets — it also changes your tax situation in significant ways. In Minnesota, divorcing spouses face several tax-related questions, from who gets to claim the kids to how alimony and property transfers affect your returns.

At Martine Law, we help our clients understand how divorce will affect their finances, including their tax obligations and benefits. Here’s what every divorcing Minnesotan should know about filing taxes before, during, and after the divorce is finalized.

1. Filing Status: Married or Single?

The first and most basic tax consideration is your filing status. Whether you file as Married Filing Jointly, Married Filing Separately, or Single depends on your marital status as of December 31st of the tax year.

If You’re Still Married on December 31

You can:

File jointly (if both agree)
File separately as married individuals

If You’re Legally Divorced Before December 31

You must:

File as Single or Head of Household (if you qualify)

Filing jointly can result in a lower combined tax bill, but beware: if your spouse misreports or hides income, you may still be liable for their mistakes. Always consult your attorney and a tax advisor before filing jointly in a contested divorce.

2. Who Claims the Children?

This is one of the most common disputes in Minnesota divorces. The IRS only allows one parent to claim each child per year for tax benefits such as:

Child Tax Credit
Earned Income Tax Credit
Head of Household status
Dependent care expenses

General Rule

The custodial parent (the one the child lives with most of the year) gets to claim the child unless they agree in writing to allow the other parent to do so. This agreement must be formalized using IRS Form 8332.

Court Orders and Agreements

In many cases, the divorce decree will spell out who claims the children and how often. Some parents alternate years, while others split based on the number of children.

To learn more, visit the IRS page on dependents and divorce.

3. Child Support and Taxes

In Minnesota, child support is not taxable income to the recipient and not tax-deductible to the payer. Unlike spousal maintenance (alimony), child support has no impact on federal income tax returns for either party.

However, missing payments or failing to follow the court order can affect your ability to claim dependents. Judges may adjust dependent claims based on compliance with the parenting plan or support obligations.

4. Spousal Maintenance (Alimony)

This has changed significantly due to the 2017 Tax Cuts and Jobs Act.

For Divorces Finalized Before 2019:

The payer can deduct alimony payments.
The recipient must report alimony as taxable income.

For Divorces Finalized After December 31, 2018:

Alimony is not deductible for the payer.
The recipient does not report it as income.

Minnesota follows federal law on this issue, so make sure you know when your divorce was finalized and what the agreement states.

5. Property Division and Taxes

Minnesota is an equitable distribution state, meaning marital property is divided fairly, not necessarily equally. The transfer of property between spouses as part of a divorce is not taxable at the time of transfer.

However, there may be future tax consequences, such as:

Capital gains when selling transferred assets
Taxable distributions from retirement accounts if not rolled over properly
Recapture taxes on depreciated property or business assets

For example, if one spouse gets the marital home and later sells it, they may owe capital gains tax depending on how much the home appreciated. These issues should be discussed in detail with your divorce lawyer and a CPA.

6. Retirement Accounts and QDROs

Splitting retirement accounts like 401(k)s, pensions, or IRAs can trigger taxes and penalties — unless done properly. The key tool here is a Qualified Domestic Relations Order (QDRO).

A QDRO is a court order that:

Specifies how much each party receives
Allows tax-free transfer from one spouse’s retirement account to the other
Protects against early withdrawal penalties

Failing to use a QDRO or misunderstanding how the funds are taxed can lead to unexpected liabilities. At Martine Law, we coordinate with financial advisors to ensure our clients handle this correctly.

7. Real Estate and the Marital Home

Selling or transferring the marital home can raise tax questions. If the home is sold during or after the divorce:

You may qualify for a capital gains tax exclusion up to $250,000 (single) or $500,000 (married filing jointly), if you lived in the home for two out of the last five years.
If one spouse keeps the home and sells it later, the exclusion may be smaller, and capital gains tax could apply.

Deciding who keeps the house and who claims the mortgage interest deduction are important issues that affect your post-divorce taxes. Learn more at the Minnesota Department of Revenue.

8. Head of Household Status

You may qualify for the Head of Household tax filing status if:

You’re unmarried by December 31
You paid more than half the cost of maintaining your home
A dependent (usually a child) lived with you for more than six months

Head of Household status often results in a lower tax bill than filing as Single. Be sure to discuss this with your tax preparer and attorney.

9. Tax Refunds and Divorce

If you and your spouse file jointly before the divorce is finalized, your tax refund will typically be split. If you’re concerned about your spouse intercepting or misusing the refund, you can ask the court to address how tax refunds are handled.

You can also file an Injured Spouse Claim with the IRS if your refund was seized due to your spouse’s debts.

10. Seek Professional Help

Tax law and divorce law are complex and constantly changing. A mistake can cost you thousands in back taxes, penalties, or missed deductions.

At Martine Law, we work closely with financial professionals to ensure our clients understand the full financial consequences of divorce — not just in the courtroom, but at tax time too.

Final Thoughts

The emotional weight of divorce is heavy enough — you don’t want to carry a surprise tax bill on top of it. By understanding your rights, filing obligations, and opportunities, you can avoid costly mistakes and set yourself up for a more stable financial future.

Make sure you speak with a qualified divorce attorney and tax advisor before making any major financial decisions. With the right guidance, you can navigate both the legal and tax aspects of divorce with confidence.

Tax Implications of Divorce in Minnesota