Dealing With a Divorce During Tax Season

Rolling Meadows Divorce Attorney

While divorce is stressful any time of year, it is worth considering what impact a divorce will have on your taxes. Since we file taxes in arrears, your filing status is determined by what your marital status was on the last day of whatever tax year you are filing for. For example, your 2015 taxes, filed in 2016, are determined by your marital status on December 31, 2015. Getting divorced now will affect your 2016 tax return, but not your 2015 tax return. While most married couples choose to file their taxes together, this is not always the case. Regardless of whether you have historically filed your tax returns separately or together, understanding your options post-divorce is one of the many important financial considerations when going through divorce proceedings.

Divorced Versus Separated: Why It Matters

According to Forbes.com, the IRS can be picky about whether you were adjudicated divorced, separated, or still married when it comes to your tax returns. Usually, the divorce must be considered final or there must be a court-order adjudicating the parties separated for the purposes of filing taxes. The best way to understand the nuances of these categorizations, and what they mean for you, your marriage, your children, and your taxes, is to consult with an experienced Illinois divorce attorney.

Matters Involving Children and Support

Your status as divorced, separated, or still married affects how exemptions will be allocated on your returns as well. Most commonly, married persons have allowable exemptions for their children and spousal maintenance, but note that child support payments are not taxable income. Spousal maintenance payments, however, are considered income and the receiving party must pay for any taxes that are ultimately owed as a result.

As for the children exemptions, once you are divorced or legally separated, only one parent may claim the children on their taxes. This is typically the custodial parent, or the parent that spends the most physical time with the children. New Illinois divorce laws that went into place in January 2016 remove the term "custody" from the statute, making the determination of who ultimately has "custody" of the children a more difficult task.

Many smart parents will consider how the tax deductions the children provide for them will affect their finances down the road. Deductions, or for other parents, lack thereof, may be offset in the form of the amount of spousal maintenance provided to the other spouse in hopes of their being some equity to the division.

Marital Assets and Property Division

The tax consequences of divorce span beyond exemptions for children and spousal support, and extend to the often one time tax ramifications of property transfers. When property is being split, whether it be real property in the form of homes or commercial buildings, personal property with assessed value, or income derived from assets, stocks, bonds, retirement accounts, and anything else that may be divisible at the time of the divorce, these things play a role in the tax filings of each respective spouse as well. Sometimes, one large lump-sum of money is transferred to a recipient of spousal support, but this payment is not generally taxed for the recipient, nor can it be deducted by the payor. Understanding which spouse can receive which tax filing benefits post-divorce can be complicated, and requires a methodical, big-picture approach to understanding the tax consequences of your decision to get divorced and how you to decide to divide your assets.

Rolling Meadows Family Law Firm

At the Law Offices of Donald J. Cosley, skilled Rolling Meadows family law attorney Donald J. Cosley has the experience necessary to handle all variations of family law matters from start to finish. Regardless of whether you are simply considering divorce, if you are currently negotiating terms of a settlement agreement, or if you have a complex, high-asset divorce, Attorney Cosley can help. One of the things that can make a divorce so stressful is a lack of understanding of the divorce procedures and options. At our firm, each client has an opportunity to ask questions, understand what is going on at each step, and make sure that all available options have been presented to them. Contact the Law Offices of Donald J. Cosley's convenient Rolling Meadows, Illinois family law firm at 847-253-3100 today for a free initial consultation.