Common Tax Considerations in a High-Net-Worth Illinois Divorce

 Posted on November 12, 2025 in Divorce

Understanding and addressing tax issues during a high-net-worth divorce is a necessity. Some assets may look valuable now, but can create hefty tax bills later. Other assets may require special forms or court orders before they can be divided. The more you know, the more you can help yourself avoid expensive mistakes. Talk to our Kane County, IL divorce lawyers today to learn more about your options for protecting your financial future.

Are Alimony Payments Taxable in Illinois?

Illinois law refers to alimony as spousal maintenance under 750 ILCS 5/504. It is financial support from one spouse to the other after a divorce. When deciding whether maintenance makes sense in your situation, the court looks at each spouse’s income and earning ability in comparison to their financial needs.

Before 2019, the spouse paying support could deduct the amount on taxes. The spouse receiving support had to report it as income. Now, spousal support is not tax-deductible for the person paying it. It is also not counted as taxable income for the person receiving it. This means support payments no longer directly affect your taxes.

Who Gets to Claim the Kids on Taxes After Divorce?

Tax benefits for children can provide real financial value for a family after a divorce. These benefits may include the child tax credit and other deductions that reduce the amount of tax owed. The parent who has most of the parenting time does not automatically receive the tax benefits. Parents can negotiate who claims the child when they create their parenting plan and final settlement.

Some parents choose to alternate claiming the children each year. If there is an odd number of children, parents may decide that one parent claims more often, or they may choose to divide the benefits based on income. In cases where one parent allows the other to claim a child, IRS Form 8332 may be required to make the agreement official.

What If There Is Hidden Income or Unpaid Taxes?

High-net-worth divorces sometimes involve multiple income sources. These may include business ownership, rental properties, investments, or commission-based income. When income is not fully reported, it can affect support and property division.

If unpaid taxes exist from a joint tax return, both spouses may be responsible. However, you may qualify for innocent spouse relief if you did not know about the missing income or tax issue. It is important to address any tax concerns early in the divorce. Handling them before a settlement helps prevent future legal or financial problems.

Which Marital Assets Come With the Highest Tax Burdens After Divorce?

Some assets can create more taxes than others. Assets that look equal in dollar value may not be equal once taxes are considered. The following types of assets often involve higher tax considerations:

• Retirement accounts such as 401(k)s and IRAs may require a Qualified Domestic Relations Order (QDRO) to divide them without penalties.

• Investment accounts may create capital gains tax if the investments grow in value over time.

• Business ownership can involve special tax rules, such as pass-through income or depreciation.

• Real estate, including vacation or rental homes, may result in capital gains tax if sold after the divorce.

Illinois uses equitable distribution under 750 ILCS 5/503. This means property is divided fairly, not always equally. Understanding tax effects helps ensure the final division is truly fair.

Schedule a Free Consultation With a Geneva, IL Divorce Attorney

What sets Serrano Hanson & Hurtado, LLC apart is that each of our attorneys provides personal attention and focuses on advocating for the best possible outcome for every client. We work with care, respect, and dedication to your goals. Contact our experienced Kane County, IL divorce lawyers today to schedule your free consultation and start working on a tax plan for your divorce. Se habla Español.