Chicago Taxation & Divorce Lawyer
Life is crazy. It’s always changing, but you can rest easy knowing there are two constants in life: death and taxes. You’re not going to avoid either of those.
We’re going to discuss divorce and taxes, though, since taxes are not usually something that couples think about when divorcing. If you don’t own significant assets, such as a marital home, then you probably won’t have to worry about it too. But if you own multiple properties, stocks, IRAs, pension plans, and other high value assets, then chances are you’ll need to worry about taxes.
Not properly paying your taxes on assets acquired through a divorce can affect you down the line—maybe even several years after a divorce is finalized. Don’t suffer the consequences. Contact a Chicago taxation & divorce lawyer from Birnbaum Gelfman Sharma & Arnoux, LLC to learn more about taxes in a divorce.
There are many things to consider when it comes to taxes in a divorce:
- Filing status. Many people get confused about this. Your tax filing status is determined by your marital status on December 31 of the filing year. If your divorce was finalized on or after January 1, then you are still considered married. Filing separate allows each person to be responsible for their own income and deductions, although you get more tax benefits when you file jointly. Plus, there are different tax brackets to consider.
- Tax credits. Both parents cannot claim tax credits, so if you have children, determine who will take the credits. Typically, the parent with primary physical custody of the child will take the credits, although many couples alternate years to make it fair.
- Alimony. Those who pay alimony get the short end of the stick. Alimony is no longer tax-deductible as of 2019. So unless you started paying alimony December 31, 2018, you’re out of luck.
- Property transfers. Find the best ways to transfer property to avoid taxable events. A financial professional can help. Note that the sale of a home is subject to capital gains tax. When it comes to splitting up retirement plans, have the court issue a qualified domestic relations order (QDRO). This will structure the transfer as an eligible rollover distribution, so there will be no tax consequences. However, the recipient needs to decide whether to keep the funds in the existing plan or roll them over
- Tax carryovers. Capital losses, net operating losses, and charitable deductions are tax carryovers that have value, just like property. Discuss how to allocate them during the divorce, not at tax time.
Contact Birnbaum Gelfman Sharma & Arnoux, LLC Today
Divorces require proper planning, especially when there are significant assets at stake. You’ll need to think about the future, since there will likely be tax implications.
Seek legal help from the team at Birnbaum Gelfman Sharma & Arnoux, LLC. We’ll help you plan appropriately so you can avoid significant tax consequences. Contact a Chicago taxation & divorce lawyer today. Call (312) 863-2800 or fill out the online form to schedule a consultation.