Four Ways Divorce Can Impact Your Taxes

 Posted on August 23, 2025 in Divorce

Divorce affects many aspects of your daily life, but it also changes your financial responsibilities, including how you file and pay taxes. Many people are surprised to learn how significantly divorce can impact their tax situation, both immediately and in the years that follow. Understanding these changes in advance can help you prepare for what comes next.

As of August 2025, federal and Illinois tax rules remain complex, but certain issues come up repeatedly in divorce cases. Our Wheaton, IL divorce attorneys can help explain how these four factors could impact your particular case. 

Your Filing Status Will Change

One of the first changes after a divorce is your filing status. If your divorce is completed by December 31 of the tax year, the IRS says that you will file as "single" or "head of household" instead of "married filing jointly." Filing as head of household may offer tax benefits, but you must meet specific requirements, such as having a dependent child who lives with you more than half the year.

Child-Related Tax Benefits

Who gets to claim children as dependents is often a major question in divorce. Only one parent can claim each child on their tax return. The parent with the most parenting time typically has this right, but parents may agree to alternate years or split dependents if they have multiple children. Claiming a child as a dependent can impact eligibility for credits such as the Child Tax Credit and the Earned Income Tax Credit.

Alimony and Taxes

The way alimony (spousal maintenance) is treated for tax purposes changed under the Tax Cuts and Jobs Act. For divorces finalized after January 1, 2019, alimony payments are no longer tax-deductible for the paying spouse and no longer taxable income for the receiving spouse. This means that neither party gains or loses a tax advantage.

Property Division and Capital Gains

Dividing marital property may also have tax implications. For example, if you negotiate for the family home, you may be responsible for capital gains taxes if you sell it in the future and the gain exceeds the federal exclusion amount. Retirement accounts can also carry tax consequences if they are not divided correctly. A Qualified Domestic Relations Order (QDRO) is usually required to transfer funds without triggering taxes or penalties.

Planning Ahead for Tax Changes Before You Get Divorced

The tax consequences of divorce will vary depending on your income, assets, and custody arrangements. What seems like a fair settlement at first may lead to unexpected tax burdens later. Understanding these issues before finalizing your divorce can save you money and prevent having to relitigate your divorce down the road.

Contact a Wheaton, IL Divorce Lawyer

Tax considerations are just one part of the divorce process, but they can have a significant influence over your future finances. At Roberts PC, we provide free consultations to help you understand how divorce will affect taxes and many other parts of your life, so you can plan carefully and start off on the right foot. Call 630-668-4211 today to speak with a Naperville, IL divorce attorney and begin planning for a fair divorce settlement.