Tax Issues and Obligations Related to Divorce

 Posted on April 15, 2026 in Family Law

Couples who previously filed taxes together find themselves in new financial territory after their divorce. This can be a little overwhelming, especially if you weren’t the one handling the taxes in your relationship.

The following are some tax specifics to be aware of during and after your 2026 divorce. These will help you avoid any surprises from the IRS down the road. A DuPage County divorce lawyer can help you sort out the specifics of your situation if you have further questions.

How Does Your Filing Status Change During an Illinois Divorce?

Your marital status on December 31 of the tax year determines your filing status for that entire year. If your divorce has not been finalized and formally entered by the court by December 31, you are still considered legally married for tax purposes. This is true even if you filed your divorce petition much earlier in the year.

In these situations, you may still have options for how you file, including:

• Married filing jointly. This typically results in a lower combined tax liability.
• Married filing separately. This keeps your finances independent but often means a higher tax bill.
• Head of household. This includes living apart for at least six months, having a qualifying dependent, and paying more than half the cost of your living situation.

The tax rates for each of these options can be found at 26 USC 1 of the Internal Revenue Code.

Filing jointly requires both spouses to cooperate. Neither party can file jointly without the other's knowledge and signature. If your relationship with your spouse is bad, filing separately may be the better choice even if it costs more. A tax advisor can work with you and your attorney to help you figure out the best option for your situation.

What Happens to a Tax Refund During a Divorce in Illinois?

A tax refund isn't generally considered new income. Instead, it’s considered marital property. This means neither spouse can simply claim the refund as their own during a pending divorce. You and your spouse will instead need to reach an agreement about how the refund will be handled. This could mean dividing it, applying it to shared debt, or including it as part of the property settlement.

The way tax refunds are handled in divorce often catches people off guard, especially if they filed much earlier in the year. If you're expecting a refund and your divorce isn't finalized yet, make sure your attorney knows so it can be accounted for in negotiations.

How Do Taxes Affect High-Asset Divorces?

For couples with larger marital estates, taxes often get much more complicated.

Capital Gains and Asset Transfers

In most divorces, transfers of property between spouses are not taxable events under IRS rules. However, high-asset divorces are more likely to involve assets that aren't held in the spouses' own names. These could be living trusts, business partnerships, or estates. Depending on how they are structured, transfers involving these types of assets may trigger tax liability.

Capital gains tax also affects high-income divorces much more frequently than lower-income divorces. If a couple holds investments, real estate, or other appreciating assets, dividing them without accounting for embedded capital gains can leave one spouse with an asset that looks valuable on paper, but has a large future tax burden attached.

Estate and Gift Tax Considerations

Wealthy couples may also need to think about estate taxes and gift tax implications, depending on how assets are structured and transferred. These are areas where the guidance of both a divorce attorney and a tax professional can make a large difference in what kinds of tax penalties are incurred.

Who Gets Child-Related Tax Breaks After the Divorce Is Finalized?

Deciding which parent claims the children as dependents going forward is an incredibly common issue. This decision affects who gets the child tax credit, education credits, and other deductions. The IRS defaults to the parent who has the majority of parenting time during the year, but parents can agree to a different arrangement. Documenting this per the official IRS form allows the primary parent to give tax exemptions to the other parent for specific tax years.

This should be addressed clearly in your divorce agreement to avoid disputes later. Some couples alternate years; others assign the deduction based on who has the children more of the time. Your lawyer can help you decide what makes the most sense for you, given your income and the amount of parenting time you’re granted.

Call a Wheaton, IL Divorce Lawyer Today

Regular taxes can be complicated; taxes during divorce are even more so. At MKFM Law, our attorneys will take the time to work through the financial details of your case so you're not caught unaware come tax season. Our DuPage County family law attorneys serve family law clients from our offices in Kane County, DuPage County, and DeKalb County for your convenience. Contact Mirabella, Kincaid, Frederick & Mirabella, LLC at 630-665-7300 to schedule your initial attorney meeting.