If you’re getting divorced in Illinois, how you’ll be affected by taxes is probably the last thing on your mind. However, preparing for and taking care of this element is essential if you don’t want to get a big surprise from the IRS. Factoring in the tax effects of your children, knowing the rules for child support and maintenance (alimony) and determining the tax consequences of division of assets are areas you should investigate thoroughly.
Examine the tax effect of splitting assets in a divorce
When you and your spouse have a stock portfolio that requires splitting when you get divorced, understanding the tax consequences is critical. While it may seem fair to split an asset 50-50, taxes paid on the assets may skew the actual percentage you receive, making the split unfavorable.
Understanding child support and alimony rules
Keeping abreast of maintenance and child support rules for taxes is important. The federal and state tax codes are modified on a regular basis and knowing how these changes affect your child support and maintenance obligations is essential. Previously, payments made for alimony were tax deductible and were considered income to the recipient. This changed for divorces finalized after Dec. 31, 2018. Knowing these rules can make it easier to handle your taxes when getting divorced and avoid costly mistakes.
Tax rules and effects when you have kids and get divorced
When you’re married and have children, it’s easy to account for your children during tax time by claiming the dependent exemption and child tax credit. However, one parent will likely provide more support and shelter after getting divorced, allowing them to claim the child tax credit and dependent exemption. Using the head of household tax filing status may also be advantageous. Factoring in these tax effects when you get divorced is essential.
During a divorce, it can be a frustrating time emotionally. Ensuring you don’t increase this stress by forgetting to follow specific tax rules can be critical.
