3 Tax Pitfalls You Need to Know If You Are Getting Divorced in Chicago

Let’s face it: divorce in Chicago is almost never easy, emotionally, legally, or financially. Indeed, amid the stress of dividing a soon-to-be divorced couple’s property, negotiating child custody, and adjusting to a new lifestyle, it is easy to overlook the tax consequences that may come with the Chicago divorce process, and as a result of the finalization of the divorce. However, if you are getting divorced in Chicago, understanding how taxes can impact your settlement and financial future is critical. Without proper planning, you could end up with an unexpected (and very unwelcome) tax obligation. Accordingly, to help individuals in Chicago who are seeking a divorce better understand some of the tax issues that may crop up in their Chicago divorce case, we discuss three common tax pitfalls in Chicago divorces here.

Pitfall 1: Misunderstanding Tax Implications of Spousal Support in Chicago Divorce Cases

First, some individuals in Chicago may not be aware of the interplay of tax obligations and spousal support (or “alimony”). Under Illinois law, it is important for soon-to-be divorced individuals to know that alimony payments are no longer tax-deductible for the paying spouse, and the receiving spouse no longer has to report them as income. What this means is that If you are the one paying alimony, you will most likely be footing the full tax burden yourself. As such, it is important to discuss the tax implications of spousal support with an experienced Chicago divorce lawyer.

Pitfall 2: Missing the Potential Tax Impact of Property Division

Secondly, there may be tax obligations that arise from the division of property in a Chicago divorce. Not all property is taxed equally. Indeed, different tax obligations arise from different types of property, such as retirement accounts versus real property. Working with an experienced Chicago divorce lawyer can help you understand the tax obligations you may face, so that you better understand what you may truly end up with in your Chicago divorce.

Pitfall 3: Child-Related Tax Issues in Chicago Divorces

Finally, who gets to claim the children on their taxes as dependents is a question that many Chicago parents going through the divorce process may have. Typically, the Internal Revenue Service (IRS) allows one parent to claim a child as a dependent. In many Chicago divorces, the custodial parent claims the child on their taxes, but this is not a hard-and-fast rule. Accordingly, an experienced Chicago divorce lawyer can help you reach a clear agreement with your soon-to-be ex so it is crystal-clear who claims the children on their taxes.

If you are in the Chicago area and you need legal help with your Chicago divorce case, contact the experienced Chicago divorce lawyers at the law firm Arnoux Sharma Standeford, LLC. The experienced Chicago divorce lawyers at Arnoux Sharma Standeford, LLC are here to help individuals in Chicago with their challenging divorce matters. Contact Arnoux Sharma Standeford, LLC and speak to a lawyer about your case now.