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Rockford Divorce Lawyer James Teeter

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Illinois Divorce Tax Attorney – Tax Considerations in Divorce

The U.S. Tax Code is complex. In a divorce, it is critical to understand the present and future tax ramifications so that there are no surprises after a divorce is final.  In many cases, an experienced Illinois tax attorney will be critical to understand the potential tax ramifications.  I help clients understand the tax issues associated with their divorce, so they can minimize tax liabilities and protect their hard-earned assets.

If you are seeking a divorce or have been served with divorce papers, I invite you to call my office to schedule a free consultation. I can discuss with you your objectives, explain your legal options, and zealously work to minimize the financial ramifications associated with asset divisions. I also encourage you to read the following frequently asked questions and information to learn more about Illinois divorce and taxation considerations.

Proudly serving clients in Rockford and throughout Winnebago, Boone, Stephenson, Ogle, and the surrounding counties and communities.

Divorce & Tax Issues FAQs

There are a number of ways that taxes can be affected by a divorce, including (but not limited to):

Changes to tax filing status.

If a couple previously filed taxes under the “married filing jointly” option, their tax status will change after the finalization of a divorce. If an individual was legally married on December 31 of a tax year, he or she may still be entitled to file jointly for that tax year. For subsequent years, however, each of the ex-spouses will need to file as single or head of household, depending on which status applies.

As a result, if you were married at the end of a calendar year but have not yet filed your taxes with your spouse for such year, the filing of taxes for that year will need to be coordinated.

Taxes on spousal maintenance (also referred to as Alimony or Spousal Support).

Before January 1, 2019, an alimony-paying spouse was entitled to deduct spousal support payments on his or her federal taxes, and the recipient spouse was required to report the payments as taxable income. Effective January 1, 2019, new Illinois legislation became effective, eliminating the tax deduction for paying spouses and making the spousal maintenance tax-free to the recipient.[1]

Tax penalties for dividing retirement accounts.

Retirement accounts are typically categorized as marital property in Illinois, meaning they are subject to division in a divorce. In many cases, there can be significant early withdrawal penalties and tax ramifications if retirement assets are not correctly transferred, especially in the case of a 401(k). Thus, working with an experienced asset division attorney may be critical to minimizing losses after a divorce. For example, it is often possible to avoid penalties by securing a Qualified Domestic Relations Order (QDRO) that authorizes the transfer of funds to a spouse’s IRA.

Exemptions for Legal Fees.

Legal Fees paid to obtain a divorce are not deductible; however, there are certain exceptions, such as legal fees paid for tax advice in connection with a divorce.

As a tax and asset division attorney serving Rockford and the surrounding communities, I always strive to protect the financial interests of every client throughout the divorce process and beyond, helping to strategically address asset transfer and taxation issues in seeking to minimize or avoid penalties and expenses.

 750 ILCS 5/504.

Most parties are aware that the individual who claims an eligible child on an income tax return can typically receive significant advantages, including a potential refund. With respect to whether you can claim the children for tax exemption purposes, such matters are typically set forth in the Marital Settlement Agreement.

If not set forth there or in the Judgment for Dissolution of Marriage, the parent who had physical residential custody of the child for the greater part of the year may typically claim the child for tax exemption purposes.  As discussed on our website, Child Support alone is not taxable to the parent receiving the child support or deductible by the parent paying child support.

Subject to the foregoing, the transfer of property between spouses at the time of a divorce is generally not a taxable event. However, the subsequent sale of such assets generally is a taxable event.

High Net Worth Marital Estates and Unique Tax Matters

If you have a high-value marital estate or unique tax issues, we will refer you to tax experts to ensure you understand all of the tax ramifications of your divorce. As a dedicated Illinois asset division attorney, I will also work closely with your tax expert to optimize the property division aspects of your divorce.

Call Today to Schedule a Free Consultation with an Experienced Divorce Attorney.

If you are contemplating or facing divorce, it is critical to understand the potential tax consequences in order to proactively address and minimize penalties and tax consequences to the extent possible. As a dedicated Rockford divorce law firm, we can handle all of the property division aspects of your divorce, and work tenaciously to secure the best outcome for you based upon your objectives. I invite you to call my office today to schedule a consultation to learn more about our representation in divorce and asset division matters.

In the interim, if you would like to read more about divorce and property division, we invite you to visit the following links:

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Attorney James O. Teeter, Jr. speaking with client. Attorney James O. Teeter, Jr. speaking with client.

Family Law Attorney James O. Teeter Jr.
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$199 CONSULTATION

(1.5 Hrs.) One Hour for $199 + 30-Minutes FREE with No-Obligation | In-Person, by Zoom or by Phone
In-Depth Discussion of Your Specific Situation and Potential Strategy | Or

Type of Case:
Illinois County:
Please enter a number from 0 to 21.

Submission of information through the contact form does not create an attorney-client relationship, so please do not submit any confidential information. If we are to serve as your attorneys, all fees and the nature of our representation will be set forth in a written agreement.