When going through a divorce, you may not have future consequences at the top of your list of priorities. Many people either forget about the long-term consequences of divorce or ignore them. Either way, not considering the long-term impact of your decisions can cause more stress in the long run. The downfall for many people going through a divorce occurs during the asset division process. You may be focused on your assets and fighting to get what you believe you deserve in the moment, but it is also necessary to understand the long-term effects of your decisions, including the implications for your taxes after divorce.
Things to Keep in Mind About Taxes During Divorce
When it comes to dividing your property and debts, taxes should also be a part of the equation. Even if tax issues are not an immediate concern, they can impact your overall financial health in the long run. When you go through the asset division process, here are a few things you should take into consideration concerning your tax situation:
Your tax filing status will likely change. Most married couples file joint tax returns, but once you are divorced, you will no longer be “married filing jointly,” but rather, “single.” This can change the amount of tax that you owe come tax time, depending on your income.
Child support and spousal maintenance payments are not deductible. A few years ago, Illinois law changed so that spousal support is no longer deductible for the paying spouse. Along with this change, the receiving spouse no longer has to report spousal support as taxable income. Child support is treated the same way, as it is not deductible by the payor or taxed for the receiver.
You cannot both claim your children on your tax returns. One of the benefits of having children when you file your tax return is being able to claim your children as dependents and potentially claim additional tax breaks. However, when you get a divorce, you must determine which of you is going to claim the children on your taxes, since you cannot both claim them in the same year.
Transferring retirement benefits can have consequences. If you have a retirement fund when you divorce, your spouse may be entitled to a portion of those funds. If you were to simply transfer their portion of the funds into their retirement account, you would likely face hefty tax penalties. To avoid these penalties, you need a QDRO, or qualified domestic relations order, which is a legal document that spells out exactly how retirement benefits are to be distributed and/or transferred.
Contact a St. Charles, IL Divorce Attorney Today
If you are planning on getting a divorce, you should know how your decisions could affect your financial situation in the future. At Goostree Law Group, we have the experience needed to help you through your divorce in a peaceful and productive manner. Our skilled team of Kane County divorce lawyers will go over your finances with you and help you make decisions that will benefit your best interests. To get started on your case and schedule a free consultation, call our office today at 630-584-4800.