How Tax Debt Is Divided During a Divorce

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How Tax Debt Is Divided During a Divorce


A woman going through a divorce thinking about dividing tax debt.
A woman going through a divorce thinking about dividing tax debt.

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Dividing tax debt during a divorce depends on when the debt was incurred, state laws and other factors. Responsibility for back taxes may be shared or assigned to one spouse, often based on whether the debt arose before or during the marriage. However, IRS rules may not align with a divorce court’s decision. A financial advisor can help clarify tax obligations and prepare you for potential financial impacts.

When dividing debt in a divorce, courts look at the type of debt and when it was incurred. Debts taken on during the marriage are typically considered shared, making both spouses liable.

Debts from before the marriage are usually treated as separate, with each spouse responsible for their own obligations.

Tax debt is often treated the same way. Whether the debt was accrued jointly or individually, and whether it occurred during the marriage, are important factors in determining responsibility.

How tax debt is divided depends on whether the state follows community property laws or equitable distribution principles. In community property states, marital debts, including tax debt, are generally split equally between spouses, regardless of income or contributions. The nine community property states are:

  • Arizona

  • California

  • Idaho

  • Louisiana

  • Nevada

  • New Mexico

  • Texas

  • Washington

  • Wisconsin

In community property states, courts may decide that both spouses share the responsibility for any tax debt incurred during the marriage. This means the debt is typically divided equally, regardless of income differences or contributions.

In equitable distribution states, tax debt is divided based on what the court considers fair, not necessarily equal. Factors like each spouse’s financial situation, earning potential and contributions to the household are considered. As a result, one spouse may be assigned a larger share of the tax debt. This approach applies in all states except the nine that follow community property laws.

A divorce settlement may assign tax debt to one spouse, but the IRS can still hold both spouses jointly liable for tax debt if they filed jointly during the marriage. Even if a divorce decree states otherwise, the IRS can pursue payment from either party.

To reduce this risk, individuals can seek innocent spouse relief from the IRS. This provision relieves a spouse of responsibility for tax debt if their ex-spouse improperly reported or omitted income on a joint tax return without their knowledge.



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