3 Important Tax Considerations in Your Illinois Divorce

 Posted on November 05,2020 in Illinois Divorce

When you are going through a divorce, you may feel that you have enough on your mind simply trying to arrange for a fair distribution of marital property and make the case for spousal support. Other financial implications of your divorce, like the way it can affect your taxes, may often slip through the cracks, leaving a lasting negative impact on your future. However, with the assistance of an experienced divorce lawyer, you can plan for the effects of divorce on your taxes so that your financial situation remains secure.

Tax Implications of Divorce in Illinois

There are many ways that your taxes can be affected by a divorce, so this is by no means an exhaustive list. However, three common ways that taxes can come into play during the divorce process include:

• Changes to your tax filing status: If you and your spouse previously chose the option of married filing jointly for your state and federal taxes, this will change after your divorce. You may still be able to file jointly during the first filing period after your divorce if you were still legally married on December 31 of the year in question, but in subsequent years, you will likely need to file as single, or as head of household if you pay more than half of the expenses of your household and live with a child or other qualifying dependent.

• Taxes on spousal maintenance: If you were familiar with Illinois spousal maintenance laws before January 1, 2019, you may be surprised to learn that taxes on these payments are treated differently for any divorce judgments after that date. The paying spouse is no longer able to deduct spousal support from income taxes, and the receiving spouse no longer has to pay income taxes on the payments he or she receives.

• Tax penalties for dividing retirement accounts: In most cases, retirement savings accounts are considered marital property in Illinois, and therefore must be divided in a divorce. However, depending on the type of account, there can be significant early withdrawal and income tax penalties if you go about the process incorrectly. To minimize losses when dividing a 401(k), especially, you should work with an attorney to obtain a Qualified Domestic Relations Order (QDRO) that allows you to transfer funds to your spouse’s IRA without penalty.

Contact a Kane County Divorce Attorney

At the distinguished law firm of Weiler & Associates, Inc., we strive to protect your financial interests throughout the divorce process and beyond. We will represent your best interests in important decisions involving marital property, spousal maintenance, and child support so you receive your fair share. In addition, we will help you understand how your divorce can affect your taxes and the bigger picture of your finances now and in the years to come. Call our reputable St. Charles divorce lawyers today at 630-331-9110 to schedule a private consultation.

Sources:

https://smartasset.com/taxes/filing-taxes-after-divorce

https://www.ilga.gov/legislation/ilcs/documents/075000050k504.htm

https://www.cnbc.com/2018/03/07/dividing-401k-assets-in-divorce-can-be-an-expensive-minefield.html