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630-472-9700Available 24/7

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Kathryn L. Harry & Associates, P.C.
678-208-9200Available 24/7

Oak Brook Divorce Tax Considerations Lawyer

Willowbrook divorce attorney

Attorneys Helping Clients Understand the Tax Implications of Divorce in DuPage County

When spouses decide to end their marriage in divorce, the process of separating their lives from each other can be very complicated, and the decisions they make as they divide their assets and debts, allocate parental responsibility, and determine their spousal maintenance or child support obligations can have a major impact on their lives for years to come. One aspect of this process that spouses should be aware of is how these decisions will affect their taxes in both the near and extended future.

At Kathryn L. Harry & Associates, P.C., we understand the stressful, overwhelming nature of dissolving a marriage, and our knowledgeable attorneys are here to help you make the right decisions and ensure that you are not blindsided when tax time comes after you have finalized your divorce.

Claiming Dependents and Tax Credits

While protecting children's best interests is the primary concern when determining how to allocate parental responsibility, parents should also be aware of how these decisions will affect the exemptions they are allowed to claim on their taxes. A child will typically be claimed as a dependent by the custodial parent, although parents may agree or the court may order them to split exemptions between them or alternate exemptions each year. When a non-custodial parent claims a child as a tax exemption in a certain year, the custodial parent must submit IRS form 8332 ("Release of Claim to Exemption for Child by Custodial Parent") with their tax return for that year.

There are two other tax credits that parents may be eligible for when they claim a child as a dependent:

  • Child Tax Credit - A parent can claim a tax credit of $1,000 for each dependent child who is under the age of 17 at the end of the year.
  • Child and Dependent Care Credit - A parent can claim a tax credit for a percentage of the expenses they paid for child care of children under the age of 13.

Marital Assets

When property is transferred between spouses as part of a divorce settlement, this transfer is not considered a gain or loss for tax purposes. However, when selling property such as real estate or business interests during divorce, this will be considered taxable gain, although the first $250,000 of the gain can be excluded, or $500,000 if the couple files jointly, which they are eligible to do if the divorce was not finalized during the calendar year for which they are filing.

Spouses should also be aware that funds transferred from retirement accounts or pensions are taxable, unless they are transferred into another eligible retirement plan, or a Qualified Domestic Relations Order (QDRO) is used to make the transfer. Property sold following the divorce will be eligible for capital gains taxes, but each spouse can exclude $125,000 of this gain from taxes.

Child Support and Spousal Maintenance

  • Child support is not considered taxable income for the parent who receives it, and child support is not tax-deductible for a parent who pays it.
  • Spousal maintenance is considered taxable income for the recipient, and it is deductible from the taxable gross income of the payer.
  • Unallocated support, which combines spousal and child support, may be an option particularly when one spouse makes significantly more than the other.

Contact a Lombard Divorce Lawyer

If you need help understanding how your taxes will be affected by your divorce, our skilled, experienced attorneys can answer your questions and advocate for your best interests in court. Contact an Elmhurst divorce attorney at 630-472-9700 to schedule a free initial consultation. We serve clients in Downers Grove, Hinsdale, Willowbrook, Western Springs, Clarendon Hills, and surrounding areas.

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