It's important to remember that while a divorce is between you and your spouse, there are a couple of other interested parties. One of them is the Internal Revenue Service.
Your tax filing status (married, head of household, single, married separate) can have dramatic effect on your tax burden in a given year. Put simply, the tax implications of divorce can be massive.
Split Simple's attorney-mediators understand this and work with it during the process of mediation. We help with financial matters, including the tax implications of your divorce. We will use our experience and sophisticated financial planning software to structure your divorce in a way that is completely legal and renders your burden as bearable as possible.
If you live in or around Chicago, Illinois and you have questions about the tax implications of divorce, please call Split Simple today at 855-665-9920.
What You Have to Consider
The first thing to understand is that your ability to file as single or married is determined by your marital status on the last day of the filing year. If you're still married on December 31, 2016, you are considered married for 2016, and you will file with that status in April. Alternatively, if your divorce was finalized at any time during the year 2016, you will be considered divorced for the entire year of 2016.
Here are some of the issues we'll keep in mind when advising you on the best options for your divorce:
- The tax implications of property division. Dividing marital property is a key part of any divorce settlement. Although the actual division of property in a divorce is non-taxable, both parties should understand that each asset may carry subsequent tax liabilities such as capital gains or penalties upon liquidation. This fact should inform every property decision made during negotiations.
- Claiming children as dependents. As a parent, you are allowed to claim a dependent child as a tax deduction. The deduction can be quite significant, especially if there are multiple children involved. Obviously the decisions you make with regard to your parenting plan will be concerned entirely with the best interests of your children. However, it's worth having a conversation about who will claim the child as a dependent- parents are allowed to reach such an arrangement if both agree to it.
- Tax implications of child support and alimony. Simply stated, although alimony is taxable to the person receiving the payment and a tax deduction to the payor, child support is tax neutral - not taxable to the recipient or a deduction to the payor. Our sophisticated financial analysis software helps you evaluate your projected cash flow given these many variables.
This list, of course, is not the end of the tax issues that must be negotiated during the process. And these issues can get very tricky, very fast. But that's why you should choose Split Simple: We understand the tax issues involved and know how to navigate them in a way that will leave you in good financial and legal standing.
If you want to learn more about how Split Simple can help you in your time of need, please call Split Simple today at 855-665-9920. We help clients throughout the Chicago, Illinois area.