Resolving Tax Matters during Divorce Essential to Avoiding Problems after Divorce
Financial issues are common in many marriages and, in some, may even be severe enough to lead to divorce. But the financial problems may not stop there. Divorced couples often experience financial issues after divorce due to unforeseen tax implications which were not addressed in the terms of the divorce. This can not only result in ongoing animosity between the couple but also potentially cause serious tax issues. No one wants the Internal Revenue Service (IRS) breathing down their necks, so it is important to address the following tax matters in your divorce:
- Deducting Legal Fees – Typically, you cannot deduct legal fees on your tax return; however, if the fees are related to the allocation or protection of income-producing assets, then the fees can be deductable. Before you file your tax return, know what you can deduct and what you can’t.
- Filing Status and Exemptions – A very important issue to resolve during divorce settlement negotiations is who will be claiming the children, or who will claim which child. In addition, matters related to the “head-of-household” filing status and exemptions must also be resolved.
- Child Support vs. Maintenance – Child support is not taxable to the parent receiving the payment and is not deductible to the parent making the payment. Maintenance, however, is deductable (for the payer). Not understanding the distinction between these terms for tax purposes can cause inconsistencies, such as one spouse treating child support as maintenance and deducting it while the other treats the support payments as child support, which can lead to an audit.
- Division of Marital Property – Marital assets are usually divided equally in terms of value, however, it may not be equal in terms of tax liability. If both spouses are awarded assets worth $400,000 but one spouse is required to pay taxes on theirs while the other is not, then the division of property is not actually equal, despite the intentions of the parties.
If all relevant matters are not addressed during the divorce process, it is likely that both spouses will experience stressful problems in the future. At Nottage and Ward, our knowledgeable divorce lawyers in Chicago can ensure that all relevant issues are resolved so that once your divorce is over, it is actually over. To find out more, call us today for a consultation at (312) 332-2915.
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Leslie has been the strongest representation I could ask for in a very complicated, emotional matter. She has continuously looked out for my best interest and the best interest of my son. She is always prompt in getting back to me and in keeping me well informed about my case.
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