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Three Possible Tax Implications of Getting Divorced in Illinois

Posted on in Divorce

shutterstock_1044314224-minWhen divorcing spouses in Illinois are negotiating fiscal issues like spousal maintenance and marital asset distribution, tax implications should never be far from mind. Divorce arrangements can differ significantly in terms of how much tax spouses will be paying or saving, and a divorce decree should never be finalized without understanding exactly what it means for your finances. Here are three areas to keep an eye on.

Child Dependents

When spouses are married, they claim their children jointly on their tax returns. After a divorce is finalized, only one parent can claim a child each year. Spouses who can work together can come up with any agreement that makes sense for them. Perhaps spouses switch off years, or certain children are always claimed by a certain spouse. Whatever the arrangement is, be sure to put it in writing so you do not accidentally trigger an IRS audit by both claiming the same child.

Asset Sales and Transfers

If a capital asset like a home will be sold in the divorce, be sure to consider the potential tax consequences of any capital gains. Spouses can agree to divide the tax burden as well as the proceeds, but they should factor this into their decision-making and put any agreement in writing.

Spousal Maintenance

While spousal maintenance (alimony) may be paid directly from one spouse to the other, there are still tax implications. The spouse receiving maintenance will have to pay taxes on it - and because the paying spouse will not be handling taxes as if they were an employer, the receiving spouse will likely want to make periodic estimated tax payments to the IRS. The spouse making payments can deduct them on their income tax return, but the IRS uses heightened scrutiny in the years immediately following divorce to make sure nobody is disguising attorneys’ fees or other post-divorce obligations as income.

Call an Experienced Arlington Heights Divorce Attorney

Understanding the tax implications of divorce can make the difference between unexpected surprises next tax season and setting yourself up for success many years into the future. An experienced Arlington Heights, IL divorce attorney with Cosley Law Office can help you explore your options and make decisions that benefit you now. Call us today at 847-253-3100.




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