5 Important Tax Considerations in a Divorce Decree

One of the most overlooked areas in a divorce decree is the tax implications of the agreement. Family Law Attorneys are not ethically able to give tax advice in Illinois, which is why clients are often encouraged to speak to their accountant regarding the tax implications of a divorce decree. However, there are general, important tax considerations in a divorce decree and how they can impact your agreement. These repercussions need to be considered during the negotiation stage. Clients can severely undermine the use of an accountant in the early stages of divorce negotiations. This blog is intended to outline some of the more important areas to pay attention to in a divorce decree, relative to taxes.

5 Key Tax Considerations in a Divorce Decree

1. The Child Dependency Exemption/Child Care Tax Credit

There are many different ways to allocate child dependency exemptions. People can really fight hard over these issues. However, it makes sense to talk to an accountant about who would benefit most from claiming the children. It also makes sense to see how claiming the children can affect your bottom line child support obligation.

Remember, if a person claims the children on their taxes, that increases their income, which means they have more money to pay support. It is a numbers game. Someone could fight hard for the dependency exemption only to then turn around and pay more in support because of it (though usually, the amount is pretty nominal overall, for many people). These are both important things to consider prior to spending time and money arguing over who will claim the children in which years.

2. Taxes Relative to Child Support

3. Awards of Cash or Property in a Divorce Decree

Some property settlements, which are tax-free, can trigger “recapture” and cause an IRS audit, as well as back taxes. This happens when the property settlement appears to be spousal maintenance, but it wasn’t called maintenance, and thus wasn’t taxed. For property settlement awards, it is important to make sure the amount paid per year won’t cause recapture to occur. This is something to speak to an accountant about to try and avoid any sort of messy unintended tax consequences.

4. Maintenance or Spousal Support (formerly known as Alimony) in a Divorce Decree

5. Attorney’s Fees Awarded in a Divorce Decree

Consult a Chicago Divorce Attorney About Tax Considerations in a Divorce Decree

The attorneys at Anderson & Boback have in-depth experience in all aspects of divorce and family law including addressing tax considerations in a divorce decree. Please contact Jessica Marshall at Anderson & Boback for questions about this topic and other questions related to Illinois divorce or family law.

THIS ARTICLE WAS PREVIOUSLY PUBLISHED AT: https://illinoislawforyou.com/divorce/tax-considerations-in-a-divorce-decree/

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