What to Expect the First Time You File Taxes After a Divorce

 Posted on July 31, 2019 in Illinois Divorce

Whether you have been married two years or 20 and are now going through the process of divorce, you should be aware of how that divorce will impact how you file your taxes going forward. Unfortunately, filing your taxes will not go back to the way it was before you were married, when you filed as single and only had a W-2, or maybe two of them. Much is changing and knowing what to expect the first time you file taxes after your divorce can make the process easier.

Determining Your Filing Status

Your filing status will be based on your marital status as of December 31st of the filing year. If you are filing your taxes for the 2018 year, then you would file as single if your divorce was final on or before the last day of the year

There are other factors to consider, such as who is deemed the custodial parent. The custodial parent, because they usually have the children for a larger percentage of the time, can claim Head of Household. This filing status is helpful in many ways.

Spousal Support Considerations

As of 2019, the rules regarding alimony have changed. The ex-spouse who is paying alimony can no longer write these payments off on their taxes. Consequently, the receiving ex-spouse no longer has to claim spousal support payments as income

There are many instances when alimony may be classified as payment for property or some other type of payment. In these cases, should know just how the court classifies the payments you are making or receiving, and whether or not they are taxable or tax-deductible

Claiming Children as Dependents

The custodial parent, or the parent who has the child or children the most number of days out of the year, is most likely going to be the parent who claims them on their taxes as dependents. This is not a hard and fast rule, however, and you should always refer to your divorce decree if you are unsure which parent should claim them

Home Sales and Retirement Accounts

When a house is sold, any capital gains will be taxed. However, when a house is sold due to divorce, each ex-spouse may be able to exclude up to a certain amount. This can reduce the amount of capital gains taxes that each will pay. There are other options when discussing the family home, such as one spouse keeping it while paying the other person for their share of the home

Any retirement accounts that are to be shared between the ex-spouses will be addressed in family court. If one spouse is eligible for a certain percentage of the other’s retirement account, they will still need to wait until it is time to use those retirement funds. However, the court will offer a Qualified Domestic Relations Order, or QDRO, to the companies the retirement accounts are held with. This QDRO will tell that company what percentage of the retirement account goes to each person

When to File Your Taxes

If you are having a difficult time with the divorce and you are the custodial parent allowed to claim the children on your taxes, you will want to file your taxes as soon as possible. Once the other parent files their taxes and claims them, it can be tough going to try to set things straight again. If there are no children involved, the only reason why you would have to wait is if you have not received all the necessary paperwork from the sale of a home or other event.

Hire a St. Charles Divorce Lawyer with Tax Law Experience

Weiler & Associates, Inc. are not your average lawyers; we are knowledgeable, skilled Kane County divorce attorneys. With experience handling tough cases in which there are legal implications due to children, a family home, or even a business that may or may not be marital property. Contact our office today and tell us your story. We may be able to help you get through your divorce with as little negative impact on your taxes as possible. Call 630-331-9110 for an appointment today.

Sources:

https://www2.illinois.gov/rev/individuals/filingrequirements/Pages/filingstatus.aspx

https://www.illinois.gov/hfs/ChildSupport/parents/Pages/IncomeShares.aspx

http://www.ides.illinois.gov/IDES%20Forms%20and%20Publications/CLI101L.pdf