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Tinley Park Divorce and Taxes Attorney

Mokena tax implications of divorce lawyer

Law Firm Helps Clients Understand the Tax Consequences of Divorce in Cook County

When a couple plans to dissolve their marriage through divorce, they will need to resolve a wide variety of legal issues as they work to separate what was once a combined partnership into two separate lives and households. Decisions made during divorce will affect a family's finances both immediately and in the future, and spouses should be sure they take steps to fully understand the tax implications of the choices they make.

Filing Status, Exemptions, and Credits

While spouses are likely to be living in separate homes during the divorce process, it may be mutually beneficial for them to continue to file a joint tax return. Spouses are able to file jointly if they were still married as of December 31 of the year for which they are filing. If the divorce was finalized on or before that date, spouses must file separately. If a dependent child lived with one spouse for more than half of the year, and that spouse paid for at least half of the costs of maintaining their home (including rent, mortgage payments, property taxes, utilities, and other household expenses), they can file their taxes as a head of household.

The children of divorced spouses can only be claimed as dependents by one person, and this will typically be the custodial parent, or the parent they spend the majority of time with. However, parents may agree to divide or alternate tax exemptions in their divorce settlement. A parent who claims a child as a dependent is also eligible to claim a Child Tax Credit for children under the age of 17 and a Child Dependent Care Credit for childcare expenses for children under the age of 13.

Tax Consequences of Property Division and Financial Support

When spouses divide marital property during divorce, they should be aware of how this division will affect the taxes they pay, including property taxes on real estate. If spouses decide to sell their marital home, they may be required to pay capital gains taxes. However, the first $250,000 of gain from the sale of the home can be excluded from taxes for single individuals, and $500,000 can be excluded for couples filing jointly.

When spouses transfer property to each other as part of their divorce settlement, these transfers are not considered taxable gains if they are included in the divorce decree and they take place within one year after the finalization of the divorce. When transferring funds from retirement accounts or pensions between, these transfers may be subject to taxes, but taxes can be avoided by filing a Qualified Domestic Relations Order (QDRO) or rolling over the funds into another retirement account.

Spouses should also be aware of how taxes are applied to the financial support they pay or receive. Child support is not tax deductible by the paying parent, and it is not considered as taxable income for the receiving parent. For divorces finalized after December 31, 2018, spousal maintenance will also not be tax deductible for the payor or taxable for the recipient.

Contact an Orland Park Divorce Lawyer

At Anderson and Associates, P.C., our attorneys have over 30 years of experience representing clients in divorce cases, and we can put this experience to work for you and help you understand how to resolve the issues that you may encounter as you determine how to minimize your tax burden following divorce. Contact our Cook County divorce attorneys at 708-226-9904 to schedule a consultation. We serve clients in Orland Park, Tinley Park, Mokena, Homer Glen, and Palos Heights.

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