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A Word of Caution: Beware of Tax Issues on the Assets You Receive in Divorce

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Illinois divorce lawyersWhen going through a divorce, couples often struggle to see anything past the present situation. Part of this is due to the emotionally stressful and overwhelming nature of divorce itself. However, there are often other factors at play. For example, divorcing parties may not be fully aware of the tax implications of the assets they receive in divorce, or they may not consider what could happen if they eventually sell an asset they receive. Unfortunately, that type of short-sidedness can have grave financial consequences. Learn more with help from the following.

Recurring Taxation After Divorce

Certain assets, like real estate, are taxed on a recurring basis. If you receive a distribution of these assets in the divorce decree, you then become responsible for their recurrent tax. Before you accept a divorce settlement, carefully consider the tax implications of each asset, you are asking for in the divorce. Your divorce attorney and a financial advisor can give you more insight on your specific situation and circumstances.

Capital Gains and Taxes

While the transfer of property during divorce is not treated as a taxable event, the sale of any item obtained in the separation is subject to taxation. So, if you receive the family home in divorce and then sell it for more than its original worth, you may be required to pay taxes on the profit you made in the transaction. Before selling any item after your divorce, be sure to talk to a financial advisor about the possible implications.

Income Taxes and Divorce

Filing your taxes for the year of your divorce can go one of two ways: you could file married but separate, or you could file your taxes jointly. Each option can have advantages and disadvantages. For example, filing your taxes jointly could ensure you receive all your exemptions and tax credits for the year, but you would have to know that you could trust one another to split any refund amount you may be owed fairly. On the other hand, you could file your taxes separately, potentially lose out on some of your exemptions or tax credits, but you could confident that you would receive the entirety of any refund you might be owed.

How Our DuPage County Divorce Lawyers Can Help

If you are planning for divorce, it is important that you analyze your situation critically – not just for today, but also on into the future. With more than 210 years of combined experience, The Stogsdill Law Firm, P.C. can carefully examine your case and advise you on your options. Learn more about how our DuPage County divorce lawyers can help with your case by scheduling a personalized consultation. Call us at 630-462-9500 today.

Sources:

https://www.irs.com/articles/the-tax-consequences-of-divorce

http://www.ilga.gov/legislation/ilcs/ilcs4.asp?ActID=2086&ChapterID=59&SeqStart=6000000&SeqEnd=8300000

https://www.irs.com/articles/divorce-advice-for-capital-gains-tax

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