Tax Implications to Consider During a Divorce in Illinois
There are so many factors to consider during a divorce that certain issues can get overlooked. Divorcing spouses often fail to consider the tax implications of their divorce in Illinois. In this blog, we will discuss some of the tax issues associated with divorce. For personalized guidance, contact a Kane County divorce attorney.
Illinois courts calculate child support payments based on the parents’ income after taxes. According to current laws, child support payments are not deductible by the payee and not taxable to the receiving parent.
So if you receive child support in Illinois, you do not have to worry about those payments being taxed.
Claiming Eligible Children
Clients who claim eligible children on income tax returns receive greater tax refunds, which makes this a serious point of contention in many Illinois divorces. However, it is not always as beneficial as divorcing parents may think.
There are several ways to allocate child dependency exemptions during a divorce in Illinois. Parents may split and claim children in all years, or alternate the years in which each parent claims them.
What is important to consider is how claiming children may impact your child support obligations. For example, if you claim the children on your taxes, it increases your income (after taxes), which means you may have to pay more in child support.
Property division may have significant tax implications during a divorce in Illinois. When dividing property, it is important to consider its tax basis. The tax basis is the value of capital investment in the property for tax purposes.
In most cases, it refers to the costs of the property to you. The tax basis of an asset affects the taxes that will be owed when it is sold or transferred. Therefore, if one spouse receives assets with a low tax basis, they may end up paying more in taxes in the future.
Spousal support, or spousal maintenance in Illinois, is another area where taxes may impact your divorce. Until recently, spousal support payments were tax-deductible for the paying spouse and taxable income for the receiving spouse.
However, the Tax Cuts and Jobs Act (TCJA) changed the tax treatment of spousal support. Under the TCJA, spousal support is no longer tax-deductible for the paying spouse, and it is no longer taxable income for the receiving spouse.
Contact a Kane County Family Law Attorney Today
We hope this article gave you some insight into the tax implications during a divorce in Illinois. Taxes can be confusing for most people, which is why working with skilled and knowledgeable professionals like an accountant and Kane County divorce lawyer is so important.
Call Shaw Sanders, P.C. at 630-584-5550 to set up a free consultation today.