A divorce attorney in Chicago might not be qualified to give you tax advice, but it's important to understand how divorce affects your taxes. And since the deadline for filing a tax return is only seven weeks away, now is the time to start getting prepared.
Tax preparation company H&R Block provides a concise overview of four tax tips for recent divorcees on its web site as summarized below. Additional information can found at the Internal Revenue Service web site.
Alimony: People who pay alimony may deduct the amount, which also is considered income to the payee. People who pay alimony are not required to itemize alimony in order to deduct it, but payees may need to make estimated quarterly payments since the IRS treats it as earned income.
The IRS treats a payment to an ex-spouse as alimony if it (a) is paid in cash, (b) is not designated as something other than alimony, (c) the parties do not file jointly, (d) the parties are not in the same household (e) there is no liability to pay after the death of the recipient spouse, and (f) the payment is not child support.
Children: Unlike alimony, child support is not deductible by the payer, nor is it treated as income to the payee.
The custodial parent may claim the child as a dependent but the noncustodial parent can claim the the Dependent Exemption with the consent of the custodial parent, using IRS Form 8332 (PDF).
Head of Household Status: You may file as Head of Household if (a) you're unmarried or considered unmarried (i.e. file a separate tax return and otherwise were separated from your spouse) on the last day of the year, (b) the qualifying person (typically a child) lived in your home for at least half of the year, and (c) you've paid more than half the cost of maintaining your home.
IRAs and Employer-Provided Retirement Plans: A Qualified Domestic Relations Order (QDRO) is a court order that addresses how divorce affects retirement accounts and tax obligations. More information can be found within IRS Publication 504.
While this post is meant to help you gain a general understanding of what happens to your taxes after a divorce, we would advise that you consult one of the many divorce attorneys in Chicago if you have a specific question.
Related Resources:
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Divorce and Taxes (FindLaw)
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Taxes in Divorce (FindLaw KnowledgeBase)
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Illinois Family Lawyer Directory (FindLaw)
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