Many wonder how alimony aka spousal support is treated for tax purposes. In fact, not too long ago a change in the law took place that changed how alimony payments are taxed. If you and your spouse had a divorce agreement in place by December 31, 2018, the payor could deduct alimony payments on their taxes while the recipient claimed payments as income, which was advantageous to a higher earning payor. However, under the new law, effective January 1, 2019, the payor may no longer deduct spousal payments from their taxes and recipients cannot claim the payments as income so structuring spousal support and property division in the most advantageous way is key. Contact an experienced Illinois spousal support attorney if you have questions.
The child tax credit reduces a parent’s taxable income by a couple of thousand dollars per child, reducing taxable income. Although the child tax credit is usually claimed by the parent who spends the most time with the child, aka the “custodial parent”, it is legal for the “noncustodial” parent to claim these credits if the custodial parent agrees. If the non-custodial parent is the higher earner, it may shield more of the family dollars from taxes, which can be put to better use. Working with an experienced divorce attorney can help you to make decisions that can save you money in the long term by understanding the tax implications of a divorce. Contact an experienced divorce attorney today to discuss your options today.
The Most Advantageous Tax Filing Status in a Divorce
Filing jointly is often more favorable when it comes to taxes and your marital status as of December 31 of each year controls your filing status. Therefore, if you are in the divorce process but finalize your divorce after the January 1, you can still file a joint return for the previous year if financially beneficial. Other favorable tax options include, married filing separately or head of household – both of which tend to have more favorable tax treatment than filing single. Discuss you filing status with your divorce attorney to determine what approach works best for your situation.
Contact an Experienced Illinois Divorce Attorney
When couples divorce, there are a lot of issues to consider including taxes. If you are considering divorce or need post divorce modification, contact Libertyville divorce lawyer Ronald L Bell & Associates for a comprehensive look at your financial situation to achieve a favorable result in your divorce at 847-495-6000.