If divorce is looming, an Illinois spouse likely has many concerns about how to manage financially. Like any financial issue, it helps to do some careful planning to reduce the chances of struggling in the future. Family law analysts say that those who are divorcing typically have three areas to focus on when it comes to their finances: tax ramifications, asset division and income reduction.
The new tax law eliminates the deduction for those who pay alimony. Those who finalize their divorces before the end of the year and are ordered to pay alimony will still benefit from the tax deduction, so it may be advantageous to settle quickly if alimony is on the table. However, while taxes can have a major effect on one’s future, it is never good to rush a divorce settlement without proper consideration of all the ramifications.
With the right legal advice, a spouse paying alimony may be able to negotiate property division to regain the tax benefits. For example, the higher earning spouse may get the taxable assets, and the lower earning spouse may receive the tax-deferred assets, such as 401(k)s. This plan can always be modified in the future, retaining the current tax benefits if the divorce is settled before the end of December.
Living on one income, dividing marital assets and weighing the burden of taxes can create even more stress for those divorcing. This is why it is wise to have the assistance of a family law professional who can provide unbiased advice and guidance. An Illinois attorney will have thorough knowledge of the new tax laws and keen insight into the best ways to minimize financial struggles after a divorce.