Lake Toback Attorneys
Those living in Illinois who file for divorce can expect an enormous number of changes to take place in their lives, especially regarding their finances. One of the ways that people’s finances will change dramatically is in the way they file their tax returns. Divorce affects filing status, which deductions one has access to, and taxes related to transferring property.
No longer being able to file as married will generally raise people’s rate of taxation. If a couple’s divorce is completed after Dec. 31 of the previous year, they have the option of filing as “Single” or “Head of Household.” “Head of Household” provides the most benefits, but there are requirements that have to be met to file under this status. Additionally, unless someone keeps custody of a child, they will usually no longer be able to take advantage of deductions for having children.
The good news is that when property is transferred as a result of a divorce, it is not considered a taxable event, no matter if it is real estate, cash or a retirement account. This is because the law does not consider property changing hands in these circumstances as gifts; instead, it sees the division of assets as giving someone their fair share of marital property. However, any future action regarding these assets will incur normal taxes.
The choices that individuals make regarding asset division and child custody will affect their finances both directly and indirectly. For people to have the information that they need to make the best choices possible, it may be a good idea for them to speak with a divorce lawyer.
Source: Huffington Post, “Preparing Your Taxes In The Year Of Divorce,” Kathleen B. Connell, March 21, 2013
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Changes to filing taxes after a divorce