Do Not Neglect The Tax Implications Of Your Divorce
Last updated on January 2, 2024
In the push and pull over property division, divorcing spouses (and their lawyers) sometimes fail to account for tax considerations. The decisions you make could have a profound impact on your short-term finances and future tax burden.
Our attorneys at Taege Law Offices are attuned to the tax implications of asset division, child custody arrangements and other facets of Illinois divorce. They will make sure you understand the tax consequences and will work to mitigate your tax hit.
How Does Divorce Affect My Taxes?
Filing status – In the year your divorce is finalized, you and your spouse will need to decide whether to submit your tax returns as married filed jointly, married filing separately, head of household or single. We can advise on the most advantageous course for your situation.
Claiming dependents – Parents with shared custody will need to decide who will claim the dependent child tax credit. Some parents take turns, others negotiate offsets, but it should be spelled out in the divorce decree.
Capital gains – If you end up selling the house or other real property in the aftermath of divorce, any gains realized from that sale may be taxable.
Retirement assets – Tax-deferred contributions and deferred compensation may harbor “tax bombs” that will disproportionately affect one spouse at retirement. You need to consider those future tax ramifications at the time of divorce.
How Do Child Support And Alimony Affect Taxes?
Child support has always been tax-neutral; it is not tax-deductible for the payor nor counted as taxable income for the recipient. As of 2018, spousal maintenance (alimony) is no longer deductible or treated as income by the IRS. Generally speaking, payments between ex-spouses have no bearing on taxes, but there are exceptions.
The Win-Win Solution
It is common that both spouses suffer adverse tax consequences from divorce. We counsel clients on the big picture. The more of your marital estate that is subject to state and federal taxes, the smaller your respective shares will be. Through divorce planning with our tax-savvy attorneys, both parties can benefit financially.
Taege Law Offices represents many high net worth clients who have complex assets and considerable tax burdens. We can knowledgeably advise on taxable assets, taxable income, taxable transactions and related issues within the broader framework of your divorce proceedings.
Talk To Our Knowledgeable Attorneys
To address your concerns about taxes and divorce, please call 312-667-7706 or reach out online to arrange a consultation.
Our Chicago divorce lawyers at Taege Law Offices represent clients throughout the greater Chicago area, including Cook, DuPage, Lake, Will and Kane counties.
