Going Through a Divorce? Learn How It Will Affect Your Taxes

 Posted on February 26, 2020 in Family Law

There is a lot to think about when you are going through a divorce. You will likely think about what your family life will look like afterward, and wonder about your own social life. While divorce does bring many changes, one that many couples do not consider is how it will affect their taxes. In Illinois, there are many tax implications that come with divorce, and below are a few of the most common.

Filing Jointly or Individually

Many people think that the minute they start talking about divorce or begin proceedings, they must file their taxes separately. That is not true. As long as the divorce was not finalized prior to December 31 of the previous year, couples can still file jointly. This is because before a judge issues a final divorce decree, a couple is still considered married in the eyes of the law.

Single or Head of Household

After a divorce is finalized, each spouse has the option to claim as single or head of household on their tax return. The option a person chooses will depend on their specific circumstances.

When a couple has gotten a divorce and the children spend most of their time with one parent, that parent usually files as head of household. This means that parents can also claim the tax exemption for the children. Sometimes, parents may divide tax exemptions between them using IRS Form 8332.

Child Support

Prior to January 1, 2019, parents that paid child support could deduct these payments from their tax return. Likewise, the parent that received the child support was expected to claim it as income. Different rules apply to any divorce that was finalized after New Year’s Day 2019, though. This was when the 2018 Tax Cuts and Jobs Act was put into place. This Act now states that payers of child support must claim those payments as income, while recipients do not claim the support on their taxes at all.

Selling the Marital Home and Other Assets

Selling the marital home and other valuable assets, such as a boat or other vehicle, is a result of many divorces. This is to make property division easier by simply liquidating the assets and splitting the profits. Although this arrangement may make sense, it is important to understand that the IRS will view any profits from a sale as a capital gain, meaning they should be taxed and these profits should be reported on a tax return.

Our Illinois Family Lawyers Can Advise on Your Divorce

There are many parts of your life that will be affected by a divorce, and your taxes are just one of them. At the Law Office of Martoccio & Martoccio, our skilled Hinsdale family lawyers can explain the many implications of divorce, and walk you through the entire process. We will also fight to protect what is yours, and to secure the fair settlement you deserve. To learn more about how we can help, call us at 630-920-8855 or contact us online for your free consultation.

Source:

https://www.irs.gov/tax-reform