Tax Implications of Divorce in Schaumburg, IL
A divorce can drastically change your financial situation as your property must be divided and you could end up either paying or receiving child support or spousal maintenance. What many do not think about when going through a divorce is how these things will change your tax situation. The division of marital property, child support, and spousal maintenance may change what you pay in taxes as well as your available tax exemptions and credits.
Our divorce attorneys at Barber Law Offices provide representation for those going through a divorce in Schaumburg, IL, including handling matters such as tax implications. We will help you negotiate settlements when it comes to marital property, spousal maintenance, and child support and ensure that you understand the tax implications of each. Taking your unique financial and tax situation into account, we can work towards a favorable solution.
Tax Filing Status
One thing that can be confusing to divorcing couples is their status when it comes to filing their taxes. Whether you should file jointly or separately for the previous year depends on when your divorce was finalized. If your divorce was finalized and you were no longer legally married before 11:59 pm on December 31, then you need to file separately for that year. You might be able to file as a head of household if you were the custodial parent for your child for at least six months of the year.
If you were still legally married when the year ended, it is up to you and your ex-spouse to determine whether to file jointly or separately. Both spouses should choose based on which option can benefit them both and include this in the divorce settlement. If the parties cannot reach a decision, the judge will decide how to divide tax refunds and taxes owed.
If you are in a position where you need to decide whether to file jointly or separately, our divorce attorneys can help advise you on the best move to make and negotiate on your behalf.
Child Tax Exemptions
In cases of divorce, the custodial parent usually claims children as dependents as only one parent is allowed to claim a child as a dependent on their tax returns. However, divorcing spouses can reach an agreement in which each one claims a different child each year or they alternate years in which one spouse claims all children as dependents. If a custodial parent agrees to let the non-custodial parent claim a child as a dependent, they must submit IRS form 8332, Release of Claim to Exemption for Child by Custodial Parent, with their tax return.
Parents who claim a dependent under the age of 17 may be eligible for a Child Tax Credit of up to $1,000 and for children under the age of 13, working parents may be eligible for a Child and Dependent Care Credit for childcare expenses. Our attorneys can help you decide how to handle claiming your children as dependents and negotiate your wishes into the divorce settlement.
Marital Property
When a spouse is awarded marital property in a divorce settlement, it is not considered a gain or a loss to report on your taxes. To be tax exempt, the transfer of this property must be included in the final divorce settlement and transferred within one year of the finalization of the divorce. However, there are some assets that may be taxable or come with tax benefits. If your home served as the primary marital residence for two of the last five years, money made from the sale of that home is taxable, but there is a tax exemption. Those who file a single tax return can exempt the first $250,000 from the sale of the home while ex-spouses who file jointly can exempt the first $500,000. It is also possible for property sold after the divorce to be subject to capital gains taxes, but each spouse can exclude the first $125,000 earned from the sale.
When it comes to money from retirement accounts or pensions, this money is taxable. You can avoid taxes on this money if you roll it over into another eligible retirement plan or pension or if the money is divided and distributed through a Qualified Domestic Relations Order (QDRO). Child support payments are not taxable income and those paying child support cannot claim these payments as a tax deduction, but the opposite is true of spousal maintenance. These payments are taxable for those receiving the payments and those paying spousal support can claim the payments as a tax deduction.
Splitting marital property can sometimes become complicated in a divorce before considering the tax implications. Our divorce attorneys will help you fight for your fair share of the marital property and we will make sure you understand the tax implications before we help you negotiate a settlement or present your case.
Divorce Lawyers in Schaumburg, IL
Allen Gabe at Barber Law Offices has years of experience representing people going through a divorce and we will work diligently in your best interests and the best interests of your children. We will keep you informed of your options available, as well as their tax implications, and fight for your desired outcome.
If you need to talk to our divorce attorneys in Schaumburg, IL, give us a call at 847-303-9780.
Related Services and Resources:
Division of Investments, Pensions and Retirement Savings
The Divorce Process
Domestic Violence Attorneys
High Asset Divorces
Mediation Attorneys
Post Decree Judgment Enforcement
Prenuptial and Postnuptial Agreements
Uncontested Divorces
Property Division Attorneys
LATEST REVIEWS
Mr Barber worked on my workers compensation case for 3 years and got me 2 settlements when they were denying everything. Also got me months of PT that I never had to pay for. Great lawyer, recommended.
Scott worked on my case for 14 years. He became family. Ever cried on the phone to your lawyer and they actually listened to you. Highly recommend initially hiring or even jumping ship to. He really does care about your...
This case was almost 20 years in the making. 20 years of physical ,emotional, financial and psychological abuse by the father of my 3 children. I met Mr.Gabe and he assured me that I had already won but it takes...
If your looking to retain an attorney that will fight for your rights; Allen Gabe is your man. In my case, there is a child that I didn't know of until the State of Illinois Child Support came after me 2.5...
Mr. Barber and Michelle were an amazing legal team that kept me informed every step of the way. When the insurance company cut my benefits off and I had no way of paying my personal bills, they fought for me...
My family owes Mr Barber a great deal of debt, he fought very hard for us. I wasn't sure what to expect when I went to him for a consultation, and he walked me through the whole process in layman's...
Allen has been a lifesaver for my family and I. I had to switch attorneys, as I needed an attorney that understood that I was in a war battle(not the typical divorce). Hiring Allen was the best decision I...
After struggling with my initial divorce attorney, I started searching for new representation. A co-worker referred me to Allen. After meeting with Allen, I knew immediately I needed to make a change. Although at first you may...
Allen Gabe is the best Lawyer we have ever had! He represented us in Lake County and we could not be happier with the results! He fights for Fathers rights and that support meant everything to us! ...
