2630 W. Bradley Place, Suite C Chicago, IL 60618
E-mail: pwa@keatinginc.com
Phone: 773-975-4020

Beth Kraszewski named as Top Best-in-State Woman Wealth Advisor by Forbes

tax implications

Tax Implications of Divorce in Chicago: Minimizing the Financial Impact

When two people get married, they never imagine that one day their happily ever after could come to an end with a divorce. However, the unfortunate truth is that not all marriages last forever. And when it comes to getting divorced in Chicago, it is crucial to understand the specific tax implications. Let’s delve into some key tax considerations you need to be aware of if you are getting divorced in the Windy City.

1. Filing Status Changes

After divorce, your filing status for taxes will change. Unlike married couples who can file jointly, divorced individuals in Chicago must file as single or head of household if they have children. It is essential to grasp how this adjustment can significantly impact your tax rates and deductions.

2. Child Support Payments

In Chicago, child support payments are typically awarded to the custodial parent by the non-custodial parent. These payments provide essential financial support for the upbringing of the children. Notably, the payer cannot deduct these payments from their taxes, ensuring that the financial responsibility remains focused exclusively on the children’s welfare. Similarly, recipients of child support are not required to report these payments as income on their taxes.

3. Alimony Payments

When one spouse in Chicago earns significantly more than the other or has sacrificed their career to support the family, alimony payments may be awarded. These payments, also known as spousal support or maintenance, are typically non tax-deductible for the payer and aren’t reported as income by the recipient.

4. Division of Assets

During a divorce, assets such as property, investments, and retirement accounts are often divided between the two parties. In Chicago, this division of assets is considered a tax-free transfer. This means that neither party will have to pay taxes on these assets at the time of the divorce. However, it’s important to note that if these assets are later sold, there may be tax implications.

5. Capital Gains Taxes

If you or your spouse decide to sell any assets before or after the divorce, capital gains taxes may come into play. Capital gains are profits made from the sale of assets such as stocks, real estate, and other investments. In Chicago, these capital gains taxes can vary depending on how long you have owned the asset and your income level. Be sure to consult with a tax professional to understand how selling assets during or after a divorce may impact your taxes.

If you’re going through a divorce in Chicago, it’s crucial to seek guidance from an experienced financial advisor. They can help you navigate the tax implications of your divorce and offer valuable insights on minimizing potential tax consequences. 

Work with us

If you’re looking for an experienced financial advisor, we can help. At Purposeful Wealth Advisors, we work closely with divorce attorneys, accountants, and other dedicated professionals to arrive at comprehensive solutions for our clients. 

Contact us today to know more about our services!

Any opinions are those of the author and not necessarily those of Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making a decision, and it does not constitute a recommendation. All opinions are as of this date and are subject to change without notice. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. and Keating Financial Advisory Services. Keating Financial Advisory Services and Purposeful Wealth Advisors are not a registered broker/dealers and are independent of Raymond James Financial Services.