Ending a marriage isn’t only an emotional transition — it’s also an economic one. Not only will you have to divide your property during the divorce process, but you may also have to rebuild your credit, reassess your retirement savings, create a new budget, and revisit your tax strategies. The following are some basic steps you can take after divorce to achieve financial security and thrive.
1. Change Your Tax Filing Status
As of the year your divorce is finalized, you will no longer be able to file your taxes “married, filing jointly.” Rather, you will file as “single” or “head of household,” and if you are employed, fill out a new W-4 for your employer. If you are eligible to file as head of household, a larger portion of your income is taxed at the lower brackets — potentially reducing your overall tax rate. In addition, the standard deduction is significantly higher than that for a single filer, which can lower your taxable income. For tax year 2025, the head of household standard deduction is $23,625, compared with $15,750 for single filers.
2. Update Your Financial Accounts
Once your divorce is finalized, it’s critical to update your financial accounts. Close any joint accounts, change your beneficiary designations as necessary (this is a common forgotten step), and remove your spouse as an authorized user from any credit cards. You should also keep a close eye on your credit. Obtain your credit reports from the major credit bureaus to ensure your credit history is accurate.
3. Redefine Your Financial Goals
Your financial goals may look very different after divorce. You might need to redefine what financial success looks like to you in a way that aligns with your current circumstances. Break your goals down into stages to make them easier to manage. For instance, your short-term goals might include establishing an emergency fund or paying off credit card debt. Your long-term goals might involve saving for your children’s education or growing your retirement fund.
4. Create a Post-Divorce Budget
Going from a two-income household to a one-income household can require creating a new budget. A tax professional can help you understand your financial picture and work with you to create a comprehensive post-divorce budget that will help you cover your new expenses. Proper budgeting after you’ve parted ways with your spouse is key to achieving financial stability. Importantly, you should also plan to put aside a set amount each month to build an emergency fund/cash reserve fund. It’s a good idea to save three to six months’ worth of expenses in the event of unforeseen circumstances, such as vehicle repairs, job loss, or medical emergencies. And I recommend building this fund first before paying for children’s education fund for example.
5. Work with a Tax Professional
Divorce can have a significant impact on your tax situation, from your filing status to the credits and deductions you may be eligible to claim. A tax professional can help you navigate your new financial circumstances, determine the tax consequences of any asset transfers made in divorce, and work with you to plan for your new tax obligations. They can also advise you regarding the tax implications of dividing your retirement account with a QDRO and assist with planning distributions to minimize the tax burden.
Contact Rolleri & Sheppard to Learn How We Can Help
If you are newly divorced, it’s essential to have an experienced tax professional by your side to help you plan for your new financial situation and minimize your tax burden. Based in Fairfield, Connecticut, Rolleri & Sheppard CPAs, LLP offers a wide range of financial and accounting services for individuals going through divorce and assists them in making informed financial decisions. Contact us online or call (203) 259-CPAS to schedule a consultation.
