Taxes are probably the last thing on your mind if your marriage is ending. You may be more focused on the immediate financial implications of the split, the divorce’s effect on your children, ownership of the marital home, and other issues. However, divorce can have major tax implications for both spouses. Read on to learn about some of the top tax-related issues Illinois couples encounter when they divorce.
Tax Implications of Property Division
You and your spouse will need to value and divide your shared property in your divorce. The way you distribute property can have certain tax advantages and disadvantages. Usually, property transfers during divorce are non-taxable events. However, each case is different, and you may decide to forgo the opportunity for tax-free transfers if there is an advantage to doing so. There can also be major tax implications associated with retirement assets and liabilities like capital losses and charitable deductions.
Choosing Your Tax Filing Status
Usually, the tax filing status you should select is fairly obvious. However, it can be confusing if you were married for part of the year and divorced for part of the year. The IRS states that a couple’s filing status should be based on their marital status on December 31. If your divorce is not finalized by the end of the year, you may need to decide whether to file jointly or separately.
The Timing of Your Divorce Can Have Tax Consequences
You and your spouse may decide to separate long before you actually file for divorce. The timing of the divorce process often depends on the couple’s relationship. However, when you finalize the divorce can have significant tax consequences, so it is important to be aware of these potential consequences and plan accordingly.
Taxes and Alimony in Illinois
Alimony, or as it is called in Illinois law, spousal maintenance, was significantly impacted by recent changes to tax laws. Spousal maintenance payments are no longer tax-deductible. The spouse who receives spousal maintenance does not pay taxes on the payments he or she receives.
Child Tax Credits for Co-Parents
If you are a parent getting divorced, you and your soon-to-be-ex will also need to figure out who will claim the Child Tax Credit. Usually, the parent with the greater amount of parenting time claims this credit. However, you may be able to structure your divorce decree in such a way that the parents alternate claiming the credit.
Contact a DuPage County Divorce Lawyer
If you are getting divorced, contact Goostree Law Group for help. Our skilled Naperville divorce attorneys can help find the best way to handle divorce issues like property division and reduce negative tax consequences. Call 630-364-4046 for a free consultation today.
Sources:
https://www.irs.gov/taxtopics/tc452
https://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm