Divorce Lawyers in Kane County
Tax Implications of an Illinois Divorce
There are numerous moving parts in a divorce and many, many decisions to be made. When making these decisions, it is important to consider all of the implications including the tax implications. Failing to consider tax liability issues in your divorce can cost you greatly. At Shaw Family Law, P.C., our attorneys are skilled at managing all of the details of a divorce. We are well-versed in both family law and tax law. Throughout the divorce process, we prioritize fighting for your objectives while taking care to minimizing tax liability and maximizing tax advantages.
Taxes and Property Division
When dividing property in a divorce, the tax ramifications should be constantly considered. Often divorcing spouses will focus on who gets what without giving proper thought to how each asset is taxed. For example, one spouse may be desperate to keep a vacation property and will compensate the other spouse with retirement assets that are equivalent to the fair market of the property value without consideration that the vacation property may come with a high property tax bill.
Capital gains taxes should also be considered when dividing investments. Some investments may be exempt from capital gains taxes and others may not. For example, stock investments worth $500,000 are not equivalent to $500,000 of equity in a marital residence. Capital gains taxes are applied to stocks when sold, but they are not applied to marital residences. Consequently, the marital residence has a greater overall value.
Tax Benefits of Residential Parent Status
Recent changes to family law have eliminated the concept of child custody in Illinois and replaced it with allocation of parental responsibilities. One parent is still typically classified as the residential parent for a number of purposes. The residential parent is typically permitted to take the child exemption when filing income taxes. This is a significant amount ($4000 in 2015 for each qualifying child). A child can only be claimed as a dependent by one taxpayer, or one divorced parent.
Additionally, the residential parent typically receives child support from the non-residential parent. Unlike alimony, child support is not considered taxable income for the receiving parent. It is also not tax deductible for the payor. Considering all of these things when negotiating a divorce settlement will make a fair and equitable result more likely.
If you are planning to file for divorce or you are already involved in divorce proceedings, contact Shaw Family Law, P.C. by calling 630-584-5550 to schedule a free consultation. One of our experienced attorneys will meet with you to go over your specific circumstances and discuss how we can help you maximize your goals and minimize your tax responsibilities in the process. Our firm works with clients throughout Kane County and the surrounding areas of Northern Illinois.