Oregon is a “common law” state. What “common law” is in Oregon and other such states is a coda of rules used by states that employ common law to identify who owns what part of property that was bought or acquired, possibly as gifts, during a couple’s marriage. Common law differs greatly with the community property view. Common law property is considered to be that a piece of property obtained by a particular member of a married couple belongs specifically and only to that person unless the property is specifically put in the names of both spouses. Given this definition if a husband files bankruptcy in Oregon, the wife has no involvement at all except for property or assets that are overtly in the name of both the husband and the wife. When the wife receives the declaration of separation, she will be able to file her Federal taxes as “Single” at the end of the year. If she does not yet have the declaration, she has the choice to file as “Married, Filing Separate” or “Married, Filing Joint” if both spouses agree to it. If the wife files “Married, Filing Separate”, the husband is force to also file with that status. Nothing obligates an ex-spouse to file jointly.
While there is no mention of any children, this does bring to light on particular situation. Where a separation or divorce declaration has not become final, if a spouse is living in a house or apartment that is separate from the estranged spouse for at least six months in the tax year, and if that spouse has a child to support, that spouse can file federal taxes as Head of Household. After the separation or divorce declaration is final, if the spouse continues supporting a dependent, then that spouse is Head of Household, and can continue to file that way.
Under different marital statuses dependents, schedule A, earned income credits, and other deductions work differently. As most people know Married, Filing Jointly is the status with the lowest taxes, so it may be worth it to file that way one last time. One note by the experts is that Married, Filing Separate, allows alimony to be claimed, if paid, of course. As filing statuses go, Head of Household is better than Single, having a higher standard deduction and lower tax rate. Married, Filing Separate has the worst overall deductions and tax rate. This filing status has both spouses / ex-spouses filing standard deductions or each must itemize their own separate deductions. A filer is accountable only for his / her taxes and paperwork. This is especially important if one spouse is filing for bankruptcy or if one spouse suspects the other spouse of filing a false tax return. When filing Single, the following tax benefits are lost:
- Credit for the Elderly and Disabled
- Hope or Lifetime Learning Educational Credits
- Earned Income Credit
- Student loan interest deduction
- Tax-free exclusion of Social Security Benefits
- Tuition and fees deduction
- Tax-free exclusion of US bond interest
- Child and Dependent Care Credit