How Will Divorce Affect My Taxes?
Marriage is known to be one of the few opportunities to reduce your tax payments. Once married, spouses can file a joint tax return. This obviously changes once the divorce papers are signed and complete. Because your incomes are no longer considered tied, they cannot be filed together whether or not you have children together. For some couples, this makes little difference to them. While for others, the money from a tax return can help keep them afloat. Some couples go so far as staying separated to keep this financial benefit. This is typically not an idea that is suggested by an attorney since tax returns can be unpredictable. Couples that are in the divorce process but have not finalized it yet can still file their taxes together until the year that they are officially divorced. Most people do not consider the effect that divorce will have on their taxes until they have to file for their taxes for the first time post-divorce. Continue reading to learn about the different areas of your tax return that will need to be adjusted after your divorce papers get signed.
Areas of Adjustment
Dependents: This is the area that is most familiar to those that do not work in the financial field. Any child is considered a dependent and must be claimed on tax returns. For those who are divorced, the custodial parent is the only one allowed to claim their child as their dependent. In other words, the parent that spends the most time caring for the child can legally claim the child on their taxes.
Medical Expenses: This is similar to claiming a dependent. If you have a child that has extensive medical expenses, you can legally claim that on your taxes. This is only allowed for the parent who paid for the majority of the expenses, even those that are not considered the custodial parent. Just because you do not house the child does not mean you cannot claim some of their expenses.
Alimony Payments: This is another term for spousal maintenance. If the law is requiring you to pay a significant amount of money to your ex-spouse to help support them, you can legally claim that in your taxes. In a way, this is the most similar alternative to filing jointly.
Asset Shifts: Divorce settlements often result in properties being divided between the two former spouses. This means that these payments also transfer from one hand to the other. On the bright side, the recipient will not be required to pay taxes on the property’s transfer. However, if the recipient decides to sell the property, he/she will have to gains tax on all the appreciation before and after the transaction.
Contact a Kane County Divorce Attorney for Help
Divorce has a variety of small details involved from the start until after the process is complete. Every area of your life will require adjustments, including your financial affairs. If you are considering filing for divorce, contact our St. Charles, IL divorce attorney for a free consultation at 630-584-5550.