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West Dundee, IL847-428-7725
St. Charles, IL630-200-4882
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How Will My Illinois Divorce Affect How I File My Taxes?

Posted on in Divorce

Kane County divorce lawyersA divorce can impact all areas of a person’s life, from physically separating to breaking apart emotionally and financially. Once the decision to divorce has been made, a couple may think the hard part is over. However, the legal process of ending a marriage raises many new queries that need to be resolved. For example, how will property and assets be divided? If children are involved, who will be awarded the allocation of parental responsibilities and who will pay child support? What are the tax implications, especially when it comes time to file your taxes? With tax season upon us, it is important to be prepared by considering the tax consequences when you get divorced in order to protect your financial future.   

Tax Implications of Divorce

Even if you or your spouse has filed the divorce petition, if you are still married as of December 31 of that given year, you have the option to file jointly for that year’s tax return. Until a divorce decree has officially been issued, you are married in the eyes of the law. However, once your divorce is final, each party has the option to claim as Single or Head of Household. The right choice for your situation will depend on your specific circumstances, and it is advisable that you speak with a tax professional.

If you have children together, the parent with the majority of the parental responsibility typically files as head of household, and the tax exemption or credit for the children usually goes to this parent. In some scenarios, parents can split tax exemptions using IRS form 8332, which means the custodial parent allows the other parent to claim a child on his or her taxes. Parents can also claim a tax credit for each dependent who is under the age of 17. There are also other credits for contributions to education and childcare.

The parent with the majority of the parenting time may also be awarded child support. These payments are not tax deductible for the payor, and they are not taxed for the custodial parent.

The 2018 Tax Cuts and Jobs Act changed the way taxes are handled in the years following a divorce. As of January 1, 2019, spousal support is no longer deductible for the paying party. In addition, the recipient does not have to include this maintenance as a portion of his or her income as long as the divorce is entered on or after that date. 

In some cases, a couple may choose to sell the marital home and split the profits. This type of property sale may incur capital gains taxes. Similarly, if retirement accounts are split and one party decides to cash it out, he or she may be required to pay taxes and/or early withdrawal penalties on the funds. 

Contact an Elgin Divorce Attorney

The end of a marriage involves making many decisions that will impact your life once the final divorce decree is issued. Many people may fail to realize that a divorce can have significant tax implications. Therefore, it is essential that you discuss your case with a qualified Algonquin asset division lawyer. At the Law Offices of Benedict Schwarz, II PC, we can guide you through all phases of the divorce process while answering any questions you may have. We have more than 50 years of experience handling family law matters. Call our office today at 630-200-4882 to schedule your free consultation.  

 

Source:

http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=075000050HPt%2E+IV&ActID=2086&ChapterID=0&SeqStart=3800000&SeqEnd=5300000

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