Taxes and Divorce in Minnesota: a FAQ

Divorce lawyers (myself included) spend most of our time thinking about custody, support, and property division, not tax code details. Many family law attorneys also put language in their retainer agreements saying they don’t give tax advice, and that you should talk to a CPA. That was common when I started 25 years ago and is still very common today.

The problem is that real people have to make real tax decisions during separation, mediation, and the first year after a divorce, often without a CPA in the mix. This post is meant to help you spot the common issues so you can ask better questions and avoid expensive surprises.

Standard disclaimer: I’m a Minnesota family law attorney, not your CPA. This is general information, not legal or tax advice.

2026 Tax Update in one sentence:

For child-related tax benefits, the update is this: Form 8332 can help a noncustodial parent claim certain child-related credits, but it does not transfer Head of Household or the Earned Income Tax Credit (EITC).   (MORE ON THIS BELOW)

1. Can divorced or separated parents “split” child-related tax benefits?

Sometimes, but not the way most people think.

What can be transferred with Form 8332

If the parents meet the IRS “special rule” requirements, the custodial parent can sign Form 8332 so the noncustodial parent can claim the child for:

• the Child Tax Credit and related dependent credits (and other items listed on the form)  

Not everything can be transferred with Form 8332;

Even if Form 8332 is signed, the noncustodial parent generally cannot claim the child for:

• Earned Income Tax Credit (EITC)  
• Head of Household filing status (this follows where the child actually lived)
• Child and Dependent Care Credit (also generally follows residency and who actually paid)

Bottom line: if your settlement talks assume “we’ll just alternate everything,” that often doesn’t work for federal tax purposes.

2. If the court order says we alternate claiming the child, is that enough?

Usually, no.

A divorce decree or parenting plan can order the parents to alternate, but the IRS still expects the proper tax form when a noncustodial parent is claiming a child under the special rule. In practice, that means the noncustodial parent attaches Form 8332 (or its equivalent) to their return.  

This is why you want that language in the Marital Termination Agreement that says this must be done.

Practical tip

If you negotiate alternating years, make the paperwork part explicit:

• who signs Form 8332
• for which tax years
• when it must be delivered (example: by January 15 each year)
• what happens if a parent refuses to sign

3. Can the noncustodial parent claim the Earned Income Tax Credit (EITC) if they claim the child tax credit?

Almost never.

This is one of the biggest changes from older internet advice. The IRS special rule that lets the noncustodial parent claim the child for certain benefits does not apply to the EITC. To claim a child for EITC, the child generally must live with you in the United States for more than half the year.  

So if someone says “I’ll claim the child this year, so I get EITC,” that is usually wrong unless the residency rules are met.

4.We were never married. Do the same “who claims the child” rules apply?

Yes.

Marital status is not the deciding factor for most child related federal tax rules. The IRS focuses on:

• who the child lived with (residency)
• who qualifies as the custodial parent
• whether Form 8332 was properly signed and attached for the benefits it covers  

5. If we separate mid year, can we both file Head of Household?

Not if you were still living together during the last six months of the year.

To file Head of Household while still technically married, you generally must be “considered unmarried,” which includes that your spouse was not a member of your household during the last 6 months of the tax year (plus other requirements).  

Example:

If you separated in August but still lived under the same roof into October, Head of Household is probably off the table for that year, even if things were rocky.

6. What’s the deal with alimony and taxes in 2026?

This changed in a big way from years past.

For divorce or separation instruments executed after 2019 (and for certain modifications after 2019 that opt in), alimony payments are not deductible by the payer and are not taxable income to the recipient.  

If your divorce decree is older, the older rules may apply. This is one of those “do not guess” areas. Bring it to your lawyer to review.

7. What about the house? Will we get hit with capital gains tax if we sell?

Two big concepts matter:

A. The home sale exclusion

If you sell your primary home and meet the IRS requirements, you may be able to exclude up to $250,000 of gain ($500,000 if married filing jointly) from income.  

B. Transfers between spouses in divorce

Transfers of property between spouses, or incident to divorce, are generally not recognized as a gain or loss at the time of transfer under federal law.  

Practical warning

Even if the transfer itself is “tax free,” the spouse who keeps an asset may also be keeping the built in tax consequences (example: future capital gains). That matters in settlement negotiations.

8. “Can’t I just file first and claim the child?”

You can try, but it can backfire fast.

When both parents claim the same child, the IRS will typically reject the second e-filed return. Then it becomes a paperwork fight, and the IRS applies its tie-breaker rules (usually driven by residency and custody). That can delay refunds and create a nasty post-divorce conflict loop.

A simple habit that prevents a lot of this

Before the end of each year, get it in writing (even a short email) covering:

• who claims each child
• who files Head of Household (if anyone)
• whether Form 8332 will be signed, and for which year

Closing thought

If you’re navigating separation or divorce, taxes are one of the easiest places to make an expensive mistake because the rules don’t always match what a judge orders or what feels “fair.” A good CPA and a divorce lawyer who understands taxes and who routinely handles divorce cases is often worth every penny.

Information obtained in mankatofamilylaw.com may contain knowledgeable content about Minnesota Family Law that may be considered beneficial to some; however, in no way should this website or its contents be considered legal advice. Mr. Kohlmeyer is a Minnesota licensed Attorney and cannot provide legal services or guidance to those outside of Minnesota. If you wish to retain Mr. Kohlmeyer as your Attorney in your Family Law matter, contact 507-625-5000.