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2013 Illinois Federal Tax Changes Affecting Divorce

Amidst all the political bartering, bickering, and arguing, sometimes its hard to lose track of what exactly is going on. We all know that at the end of 2012 there was the “fiscal cliff.” The fiscal cliff was resolved, but many people don’t know exactly what happened. Some of the changes may impact those involved in family law proceedings.

Of course, for those with children, the Illinois federal tax changes is one of the most significant benefits is the child tax credit. This credit was scheduled to revert back to its former amount, which would have significantly reduced the amount of the benefit to all parents. The child tax credit was extended for another five years. It will remain at $1,000 per child until 2017.

The adoption tax credit was made permanent. Parents adopting an unrelated child will now be able to receive a substantial tax benefit from the federal government. The adoption tax credit will offset nearly $13,000 of adoption-related expenses for adopting parents.

The educational credits implemented in 2010 will also remain in effect. In 2010, the Hope credit was replaced with the American Opportunity Tax Credit. The AOC gives a credit of up to $2,500 per year for the first four years of a college education. This credit lasts twice as long as the Hope credit, requires less expenses to generate the same amount of credit, and includes more types of expenses in its definition of qualifying expenses. The AOC was extended to 2017.

While not exactly directly related to divorce or family law cases, the enhancements to the earned income tax credit were also left in effect for five more years.

Affordable Care Act in Illinois Federal Tax Changes:

For those earning more than $200,000 there were some negative changes, including limitations on dependent exemptions. Tax rates were also increase for those earning more than $400,000 per year. This is in conjunction with the increased taxes for high-income taxpayers resulting from the Affordable Care Act.

One of the most significant increase in taxes was overlooked by most media sources. The temporary tax holiday from the payroll tax ended. As a result, the payroll tax increased by 2%, resulting in lower net incomes for virtually everyone earning less than $110,000 annually.