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Tax Implications of Divorce


Attorneys Assisting Clients with Divorce Tax Consequences and Other Complex Financial Issues

When a marriage is dissolved, there are many financial implications that must be considered. If you are facing a divorce, one area you need to think through very carefully is the tax consequences. An asset division agreement that does not take into account the tax implications of the divorce could expose you to some very unpleasant surprises down the road. For this reason, it is important to work with an attorney who has extensive experience with these issues.

At the Law Office of Vogel & Mourelatos, LLC, we have in-depth knowledge of the tax implications of divorce and other complex divorce issuesOur lawyers have over three decades of combined experience in this area of the law, and we have helped thousands of clients resolve important tax issues, so they can come out of their divorce in the best possible financial position. We have dealt with nearly every issue divorcing spouses face, and our clients trust us to help guide them through this difficult time.

How Do Taxes Impact a Divorce in Illinois?

When negotiating the division of assets in a divorce, there are several areas in which the potential tax implications should be considered. Many types of property do not incur a tax liability when transferred, but there are several exceptions to this rule, including:

  • Sale of Real Estate: Real estate property that is sold as part of the asset division may be subject to capital gains taxes.
  • Retirement Assets: The IRS has specific procedures that must be followed when dividing retirement assets. Cashing out retirement accounts without following these guidelines can incur significant tax penalties.
  • Stock Options: The tax implications of liquidating stock options are highly complex and depend largely on how the options are classified.

Recent changes to federal tax laws have impacted several other aspects of the divorce process, such as:

  • Alimony/Maintenance/Spousal Support: Currently, spousal maintenance is tax-deductible for the payor and taxable income for the recipient. This will remain in effect for divorces finalized before the end of 2018. For divorces finalized on January 1, 2019 and thereafter, spousal support payments can no longer be deducted by the payor, and the recipient no longer needs to claim the payments as income. This change could have significant ramifications, particularly in high net worth divorces in which the payor is pushed into a higher tax bracket.
  • Allocation of Parental Responsibility: As of January 1, 2018, the standard deduction has been doubled, dependency exemptions have been repealed, and the per-child tax credit has been increased from $1,000 to $2,000. The tax credit can only be claimed if you could also claim the child as a dependent under the old rules. In the case of a divorce, if the non-allocated parent wants to claim the credit, the parent with the majority of parenting time must assign them that right by filing IRS Form 8332.
  • Fewer Deductible Expenses: Divorcing spouses can no longer deduct tax preparation fees and legal fees paid specifically to secure spousal support. In addition, because the standard deduction has been doubled, fewer taxpayers will itemize deductions at all, which makes other applicable deductions potentially less meaningful when dividing assets.

Speak With a Knowledgeable McHenry County Divorce Lawyer

Taxes impact numerous areas of our lives. Failure to consider the tax consequences during a divorce can have serious financial ramifications in the future. At the Law Office of Vogel & Mourelatos, LLC, we stay on top of all the latest changes in the tax laws, and we can advise you on the tax implications of divorce for your specific circumstances.

For an initial consultation with one of our experienced divorce attorneys, contact our office today at 847-428-7725 or 630-200-4882. We serve clients in Kane County, McHenry County, DuPage County, Cook County/Rolling Meadows, Algonquin, Barrington, Barrington Hills, Batavia, Bull Valley, Burlington, Campton Hills, Carpentersville, Cary, Crystal Lake, Dundee, East Dundee, Elgin, Geneva, Lake in the Hills, Pingree Grove, St. Charles, South Elgin, West Chicago, West Dundee, Woodstock, and the surrounding Illinois