Life rarely moves on a tax schedule.
You get married in June, lose a job in October, finalize a divorce in February, and then suddenly it’s April, and you’re sitting in front of a tax return that looks nothing like last year’s. The boxes are the same, but your situation isn’t.
Major life events don’t just change how you feel. They change how you file. Your filing status, your deductions, your withholding, your liability, all of it can shift dramatically based on what happened to you in the past twelve months. And if you don’t account for those changes correctly, you’re either leaving money on the table or setting yourself up for an unexpected bill from the IRS.
The good news is that none of this is insurmountable. You just need to know what changed and what to do about it.
At Tax Resolution Accounting, we work with individuals and families across Virginia who are navigating exactly these kinds of transitions. This guide covers the three most common major life events we see, marriage, divorce, and job loss, and walks you through what each one means for your taxes.
Did your life change significantly this year?
The tax implications of marriage, divorce, and job loss are more complex than most people realize. Our Virginia team can make sure your return reflects your situation accurately, and finds every opportunity to reduce what you owe.
Schedule your tax preparation appointment today
Getting Married? Here’s How It Changes Your Taxes
Marriage is one of the most significant financial milestones in a person’s life, and it comes with a set of tax changes that take effect the moment you say “I do.” For tax purposes, the IRS considers you married for the entire year if you were legally married on December 31st, even if the wedding was on New Year’s Eve.
Your Filing Status Changes
Once you’re married, you can no longer file as Single. You now have two options: Married Filing Jointly or Married Filing Separately. For most couples, filing jointly produces a better outcome, you combine your incomes and deductions and typically pay less overall.
However, there are situations where filing separately makes more sense. If one spouse has significant medical expenses, high student loan payments under an income-driven repayment plan, or certain types of liability concerns, a tax professional can run the numbers both ways to find the better outcome.
The Marriage Bonus, and the Marriage Penalty
You may have heard of the “marriage penalty”, the idea that combining incomes can push a couple into a higher tax bracket than they’d be in separately. This can happen when both spouses earn similar, moderately high incomes.
On the flip side, there’s also a marriage bonus. When one spouse earns significantly more than the other, or when one spouse doesn’t work, filing jointly often results in a lower overall tax bill than either person would face alone.
The only way to know which side of the equation you fall on is to actually run the numbers, which is another strong argument for working with a professional in the first year of marriage.
Update Your Withholding Immediately
If you’re both employed, your W-4 forms need to be updated as soon as possible after getting married. The old withholding amounts were calculated based on your status as a single person. If you don’t update them, you may end up significantly under-withheld and owe a large amount when you file, possibly with penalties on top.
The IRS withholding estimator can help, but a tax professional can give you a more precise number based on your combined income, deductions, and any other factors specific to your situation.
Other Marriage-Related Tax Considerations
- If you changed your name, make sure your Social Security Administration records are updated before you file, a name mismatch between your return and SSA records can delay processing.
- If one or both spouses has a Health Savings Account (HSA), contribution limits change based on your new family status.
- Combining finances means combining tax histories. If your spouse has outstanding tax debt, that can affect joint filings. An injured spouse form may protect your portion of any refund.
- If either of you owns a home, business, or investment accounts, those need to be reviewed through the lens of your new combined tax situation.
Going Through a Divorce? The Tax Implications Are Serious
Divorce is stressful enough without also having to untangle the tax consequences. But ignoring them doesn’t make them go away. The year you separate or finalize a divorce, your tax picture changes significantly, and getting it wrong can be expensive.
Your Filing Status Depends on December 31st
Just like marriage, the IRS uses your marital status as of December 31st to determine how you file for the entire year. If your divorce was finalized by December 31st, you file as Single (or Head of Household if you qualify). If it was not yet finalized, you are still legally married in the eyes of the IRS for that tax year.
For some couples going through a lengthy divorce, this creates complicated decisions about whether to file jointly one final time or separately. Neither option is automatically right, it depends on your specific income, deductions, and what you and your former spouse can agree to.
Who Claims the Children?
This is one of the most common points of confusion, and conflict, in post-divorce tax filing. Generally, the custodial parent (the one the child lives with for more nights during the year) has the right to claim the child as a dependent and to take related credits like the Child Tax Credit.
However, a divorce agreement can transfer that right to the noncustodial parent using IRS Form 8332. Whatever your agreement says, only one parent can claim a child in any given tax year. Duplicate claims trigger IRS reviews and can create significant headaches for both parties.
If you’re unsure how your custody arrangement translates to tax filing rules, this is exactly the kind of question a professional can help you sort through before you file.
Alimony and the Year Your Divorce Was Finalized
The tax treatment of alimony changed significantly under the Tax Cuts and Jobs Act. For divorce agreements finalized on or after January 1, 2019, alimony payments are no longer deductible for the payer and no longer taxable income for the recipient.
If your divorce was finalized before 2019, the old rules may still apply, alimony is deductible for the payer and taxable for the recipient. It’s critical to know which rules apply to your situation, because treating this incorrectly on your return can trigger an IRS notice or audit.
Property Transfers and Capital Gains
Transfers of property between spouses as part of a divorce settlement are generally not taxable at the time of the transfer. However, if you later sell a home or investment asset that you received in the divorce, your cost basis for calculating capital gains goes back to the original purchase price, not the value at the time of the divorce.
This is a detail that catches many people off guard when they sell a home or investment a year or two after a divorce and end up with a larger capital gains liability than expected. Understanding your basis on any assets you received in a settlement is an important part of post-divorce financial planning.
Head of Household Status
If you are divorced or legally separated and have a qualifying child living with you, you may be eligible to file as Head of Household rather than Single. This is a significantly better filing status, it comes with a larger standard deduction and lower tax rates. But the qualifications are specific: you must have paid more than half the cost of keeping up your home during the year, and your child must have lived with you for more than half the year.
Many newly divorced parents miss this filing status simply because they don’t know it exists or assume they don’t qualify. It’s worth asking.
Lost Your Job? Here’s What You Need to Know at Tax Time
Job loss is hard in every dimension, financially, emotionally, and logistically. The last thing most people want to think about during that time is taxes. But several things happen the moment your employment ends that have real implications for your return, and understanding them early can save you from a painful surprise.
Unemployment Benefits Are Taxable Income
This surprises more people than it should. Unemployment compensation is fully taxable at the federal level. The state of Virginia also taxes unemployment benefits as ordinary income.
When you receive unemployment, you have the option to have federal income tax withheld at a flat 10% rate. Many people opt out of this to maximize the money coming in each week, which is understandable, but it means you’ll owe that tax when you file. If you received unemployment for most of the year, the amount owed can be significant.
If you’re currently receiving unemployment and haven’t elected withholding, it’s not too late to start or to set aside a portion of each payment to cover your eventual tax bill.
Your Final Paycheck and Severance
If you received a severance package, that money is taxable income, just like your regular salary. Your employer should withhold taxes, but depending on how the severance was structured, the withholding might not reflect your actual tax rate for the year, especially if your income was high earlier in the year.
Accrued paid time off that was paid out upon separation is also taxable. Make sure you account for all forms of compensation you received, not just your regular paychecks.
Health Insurance Costs May Now Be Deductible
If you lost employer-sponsored coverage and began paying for insurance through COBRA or the health insurance marketplace, those premiums may be deductible. If you started doing any self-employed or freelance work after your job loss, the self-employed health insurance deduction may apply, which allows you to deduct 100% of your premiums.
The rules around health insurance deductibility are nuanced, they depend on whether you had access to any employer plan at any point during the year, so this is an area where professional guidance pays off.
Retirement Account Withdrawals
Job loss sometimes leads people to tap into retirement savings to cover living expenses. If you took an early distribution from a 401(k) or traditional IRA, meaning you’re under age 59½, that money is taxable income, and you’ll owe a 10% early withdrawal penalty on top of ordinary income tax.
There are exceptions to the penalty for certain hardship situations, and the CARES Act provided some temporary relief during the pandemic, but those provisions have expired. If you took a retirement distribution during a period of job loss, make sure your tax preparer knows about it and the circumstances surrounding it.
Job Search Expenses
Unfortunately, unreimbursed job search expenses are no longer deductible for most people under current federal tax law. The Tax Cuts and Jobs Act eliminated that deduction for W-2 employees through at least 2025. If you’re searching for work in the same field, this is worth monitoring, but for now, don’t count on deducting your resume writing or interview travel costs.
Starting a Side Business or Freelancing During Job Loss
Many people who lose a job turn to freelance or consulting work to bridge the income gap. If that happened to you, you’re now self-employed, at least partially, and a whole new set of tax rules applies.
You’ll need to report that self-employment income, pay self-employment tax on your net earnings, and track your business expenses as deductions. If your freelance income was substantial, you may also owe estimated taxes. The sooner you understand your obligations, the better positioned you’ll be to avoid penalties.
Lost your job or started freelancing mid-year?
Unemployment income, severance, COBRA premiums, retirement withdrawals, and new self-employment all have tax implications that are easy to get wrong. Our Virginia tax professionals help you navigate the full picture, accurately.
Talk to a Tax Resolution Accounting professional today
What All Three of These Events Have in Common
Marriage, divorce, and job loss are very different experiences, but they all share one important tax characteristic: they change your situation mid-year in ways that your original withholding and filing plan didn’t account for.
The most common mistake people make in any of these situations is assuming their taxes will work out the same way they always have. They don’t update their withholding. They don’t adjust their estimated payments. They don’t gather different documents. And then they’re caught off guard when they sit down to file.
A few steps apply regardless of which life event you’ve experienced:
- Update your W-4 with your employer as soon as your situation changes so withholding reflects your new reality.
- Gather all income documents from every source, including unemployment, severance, or freelance income, not just your W-2.
- Know your new filing status and understand which credits and deductions now apply or no longer apply to you.
- If you anticipate owing money, explore whether you need to make an estimated payment before your return is filed to avoid penalties.
- Work with a professional who understands the tax implications of life transitions, not just general tax software that asks the same questions every year.
How Tax Resolution Accounting Helps Virginians Navigate Life Transitions
A tax return that looks simple on the surface can become genuinely complex after a major life event. Filing status changes, new income sources, shifting deductions, dependent disputes, and retroactive adjustments all require careful attention, and the cost of getting it wrong can far exceed the cost of getting professional help from the start.
At Tax Resolution Accounting, we work with individuals throughout Virginia who are dealing with exactly these kinds of situations. Our team includes IRS Enrolled Agents and NTPI Fellows, credentialed professionals who handle complex returns regularly and who are authorized to represent clients before the IRS if any issues arise.
We’re not a pop-up tax office that appears in February and vanishes in May. We’re a year-round firm based in Lynchburg that serves clients across Virginia with tax preparation, tax resolution, and bookkeeping services under one roof. When your situation changes, we’re here to help you understand what it means for your finances, not just this year, but going forward.
Whether you got married last summer, finalized a divorce earlier this year, or spent several months between jobs, we can make sure your return is accurate, complete, and as advantageous as the law allows.
Your life changed. Your tax return should reflect that.
Don’t file a return based on last year’s situation. Let Tax Resolution Accounting review your full picture and make sure everything is handled correctly, from filing status to every deduction you’re now entitled to.
Book your Virginia tax preparation appointment today
Frequently Asked Questions About Filing Taxes After a Major Life Event
If I got married in December, do I file as married for the whole year?
Yes. The IRS uses your marital status as of December 31st to determine your filing status for the entire tax year. If you were legally married on that date, even if the wedding was days earlier, you are considered married for the full year.
My divorce wasn’t finalized until January. Can I still file as single for last year?
No. Since your divorce was not finalized by December 31st of the previous year, you are still legally married for that tax year. You can either file jointly with your spouse or file separately as Married Filing Separately. A tax professional can help you determine which approach is better for your situation.
Is unemployment income really taxable?
Yes, fully. Federal unemployment compensation is taxable income at the federal level, and Virginia taxes it as ordinary income as well. If you didn’t have taxes withheld from your unemployment payments, you’ll owe that amount when you file. If you received unemployment for a significant portion of the year, this can add up to a substantial balance due.
Who claims the children after a divorce?
Generally, the parent with whom the child lived for more nights during the tax year, the custodial parent, has the right to claim the child as a dependent. However, the custodial parent can sign Form 8332 to transfer that right to the noncustodial parent for a given year. Whatever the arrangement, only one parent can claim each child per year.
I received a severance package when I was laid off. Is that taxable?
Yes. Severance pay is treated as ordinary income and is subject to federal and state income tax, as well as Social Security and Medicare taxes. Your employer should withhold taxes, but the amount withheld may not perfectly match your actual liability, especially if your income varied significantly during the year.
Can I file as Head of Household after my divorce?
Possibly. To qualify for Head of Household filing status, you must be unmarried (or considered unmarried) as of December 31st, you must have paid more than half the cost of maintaining your home, and a qualifying child must have lived with you for more than half the year. If you meet all three criteria, this status offers a higher standard deduction and better tax rates than filing as Single.
Should I work with a tax professional after a major life event?
For most people, yes, especially in the first year after the event. The tax rules around marriage, divorce, and job loss involve nuances that standard tax software often misses. A professional tax preparer will ask the right questions, apply the right rules to your specific situation, identify deductions and credits you might not know about, and make sure your return doesn’t create problems down the road.
