Tax Considerations to Be Aware of in Your DuPage County Divorce
Property division, parenting plans, child support - with so many things to contend with during a divorce case, tax considerations often get put on the back burner. If you are planning to divorce, it is very important that you understand how the divorce will influence your tax obligations and prepare appropriately. Educating yourself about tax-related matters now can help you avoid unpleasant surprises and unexpected fees later on.
Tax Filing Status
Once the divorce is finalized, you and your spouse will file taxes separately. During the divorce process, however, you may still be allowed to file jointly. If your divorce was not finalized in the previous year, you can file jointly. Filing jointly may allow for a higher deduction and therefore, a larger refund. If your divorce decree was issued on or before December 31, you cannot file jointly for that year.
Tax Considerations for Retirement Accounts
There are tax penalties and fees associated with early withdrawal from retirement accounts. If your or your spouse has a retirement account and contributed funds to it during the marriage, part or all of the retirement funds are likely marital property. To avoid penalties and tax implications when dividing retirement accounts make sure you use the appropriate legal process and orders for dividing shared retirement funds. Typically, this involves a qualified domestic relations order (QDRO).
Capital Gains Taxes
If you choose to sell property during your divorce, it is important to consider the impact of any capital gains taxes. Most of the time, divorcing spouses do not have to pay capital gains taxes on property transferred as part of a divorce settlement. However, there are a few exceptions to this. For example, certain real estate transactions may result in capital gains taxes. If you sell your primary home, you can exclude the first $250,000 in profit from your taxable income. You only have to pay capital gains tax if you make more than $250,000 or you file jointly with your spouse and earn over $500,000. If the proceeds from the sale exceed these limitations, this could result in a higher tax burden.
Contact our DuPage County Divorce Lawyers
Taxes are just one element to consider during your divorce. At MKFM Law, we recognize that each divorce case comes with its unique complexities and challenges. Our Wheaton divorce attorneys are equipped to meet those challenges and provide the skilled legal representation you need. Call 630-665-7300 for a confidential consultation.