Chicago Divorce Lawyer For Tax Considerations

Chicago Family Law Attorney For Filing Status and Other Tax Implications of Divorce in Cook County

Many aspects of the divorce process will affect your financial situation, most notably the division of marital assets and any orders for child support and spousal maintenance. Getting a divorce can also affect your taxes in unexpected ways, and it is important to consider these tax implications as you negotiate the terms of your divorce agreement and prepare for your life after divorce.

At The Law Office of George J. Skuros, we have decades of experience representing clients throughout the divorce process, and we make it a priority to keep our clients educated and well informed about the possible outcomes of their case and the impact of their decisions. With our guidance, you can manage your property and assets in a way that minimizes negative tax consequences and leaves you in a better position to rebuild your life.

Tax Filing Status and Dependents After an Illinois Divorce

When you end a marriage, one of the most significant tax changes you will experience is your filing status. It is common for married couples to file their taxes jointly, allowing them to take a larger standardized deduction and reduce their taxable income. Until your divorce is finalized, it may be possible to continue filing jointly, but starting with the first filing period after the year when your marriage is dissolved, you will need to change your filing status to either single or head of household, depending on the circumstances.

When you have children under the age of 18 at the time of your divorce, you will also need to determine which parent will be allowed to claim them as dependents, since each child may only be claimed once per year. By default, the parent with the larger share of parenting time has the right to claim a child on their tax returns, but it is possible to negotiate for alternative arrangements. For example, you could decide to alternate years when each parent can claim the children, or if you have multiple children, each parent could claim one. These decisions have many implications, including the ability to claim child tax credits or file as head of household and take the increased standardized deduction.

Other Tax Considerations in Divorce

Aside from your filing status, your divorce can affect taxes in a variety of other ways, including:

• Child support and spousal support - Many divorcing couples are unsure about how support payments are taxed, especially since the law in Illinois has changed within the last few years. It is important to know that in orders established since 2019, neither spousal support nor child support is tax-deductible for the paying spouse, and neither qualifies as taxable income for the receiving spouse.
• Capital gains taxes on investments - The division of marital property often involves the sale or liquidation of certain assets to fairly distribute their value between spouses. However, if you attempt to sell investments like stocks, businesses, or real estate properties, you could owe significant capital gains taxes based on their increase in value since the time when you acquired them. As such, it is often more financially beneficial to allocate shares to each spouse or keep investments intact.
• Property taxes - A spouse who is granted the marital home or other real estate property will usually also become responsible for its associated expenses, including annual property taxes owed. It is important to consider this cost alongside the benefits of keeping a home.
• Income tax on retirement withdrawals - You may also need to divide retirement accounts that contain marital assets. It is important to note that withdrawals from accounts such as traditional IRAs and 401(k)s usually qualify as taxable income, and they will also trigger early withdrawal penalties if you are below the age of 59½. To avoid incurring taxes and penalties, you should be sure to obtain a QDRO or include specific provisions for dividing an IRA in your divorce order.

Contact a North Shore Divorce Lawyer

If you have questions about the effects of your divorce on your taxes, we are available for a free consultation when you contact us at 312-884-1222. We represent clients throughout Cook County and the surrounding areas, including Chicago, the North Shore, Park Ridge, Mount Prospect, Des Plaines, Schaumburg, Arlington Heights, and Inverness.