How Does Divorce Affect Your Taxes in Illinois?

 Posted on July 21, 2026 in Divorce

When you get divorced in 2026, your settlement can address several tax questions that may affect your tax return. Your agreement can address who claims your children, how property is divided, and what tax paperwork each spouse must provide. A Cook County, IL divorce attorney can address these tax considerations in your settlement and coordinate with a tax professional when specialized advice is needed. 

Does Your Tax Filing Status Change After an Illinois Divorce?

Your filing status depends on your marital status on the last day of the tax year and not on when your Illinois divorce case began. If your divorce is final by December 31, the IRS treats you as unmarried for that whole year. Many divorced parents may qualify to file as head of household instead of single. To use this status, you generally need to:

• Be unmarried on the last day of the tax year

• Pay more than half the cost of running your home

• Have a qualifying child live with you for more than half the year

If your divorce is not final by December 31, you generally remain married for federal filing purposes. However, you may still qualify as "considered unmarried" under the separate IRS requirements for head-of-household status.

Who Gets to Claim the Children as Dependents After an Illinois Divorce?

Only one parent can claim a shared child as a dependent each year. Under 750 ILCS 5/505(a)(3)(C)(I), the parent with the majority of parenting time is generally entitled to claim the child unless the court orders otherwise or the parents agree to another plan. However, federal tax law determines whether a parent qualifies for a particular federal tax benefit.

Claiming a child may qualify a parent for the Child Tax Credit and other tax benefits, so this decision can have a significant financial impact. Because these tax benefits can be valuable, parents often negotiate who will claim the child, sometimes alternating by year or dividing the claims between multiple children. 

The Marital Settlement Agreement should identify which parent may claim each child, specify the applicable tax years, and require the timely execution of Form 8332 when necessary. Clear language can reduce future disputes, although each parent must still satisfy federal tax requirements.

How Does Your Divorce Settlement Handle Spousal Maintenance and Taxes?

Spousal maintenance, often called alimony, is not taxed as income for the person who gets it. It also cannot be deducted by the person who pays it. This generally applies to maintenance paid under a divorce or separation instrument executed after December 31, 2018, when the Tax Cuts and Jobs Act removed the older deduction. Child support is likewise not deductible by the paying parent and is not taxable income to the receiving parent.

This shift changed how maintenance gets negotiated. Before 2019, the paying spouse had a tax break tied to maintenance payments, and that break made a higher number easier to accept. This incentive is now gone, so settlement talks tend to focus more directly on the dollar amount itself. 

If you are changing a maintenance order entered before 2019, your attorney should review it carefully. Older agreements usually follow the old tax rules, and those rules stay in place unless the modified order specifically says the new federal tax rules apply.

Are Property Transfers Taxable in an Illinois Divorce?

Dividing property in a divorce does not usually trigger an immediate federal income tax bill. In most cases, no gain or loss is recognized when property is transferred between spouses or to a former spouse as part of a divorce. This rule can apply to the marital home, investment accounts, and many other assets divided in the settlement.

This rule applies to the transfer itself. If an asset is sold to generate cash for the division, the sale may produce a taxable gain even though a direct transfer between the spouses would not.

The IRS generally does not reset the asset's tax basis when it is transferred. Instead, the spouse who receives the asset usually keeps the other spouse's cost basis, or the original amount paid for the asset, with certain adjustments over time. If the receiving spouse later sells the asset, that cost basis is used to calculate the taxable gain or loss.

Because of this, two assets worth the same amount today can lead to very different tax bills in the future. Your attorney can consider those future tax costs during settlement talks before the assets are divided.

Schedule a Free Consultation with a Cook County, IL Divorce Attorney

Our attorneys work to make sure your settlement addresses tax questions clearly. We prepare every client with a realistic picture of what could happen, while we still push hard for the best result your case allows. Call The Law Office of George J. Skuros today at 312-884-1222 to schedule a free consultation with a Chicago, IL family law lawyer.