If you were divorced as of 11:59 p.m. on December 31st, you can file as single for the entire year. High-income married couples can get hit with the “marriage penalty” because their combined incomes put them in a higher tax bracket.
As Marketplace reports, filing “single” could be better for you, and every cent counts. Some can be better off filing “married jointly”, but sharing any tax savings sharing information with your soon-to-be Ex, may make filing “single” your choice.
I’ve written about divorce and taxes before. The 2012 American Taxpayer Relief Act made permanent the Bush-era expanded standard deduction, and the expanded 15% bracket for joint filers.
But for high-income earners, the 2012 law raised taxes on couples making more than $450,000, and individuals making more than $400,000. As it turns out, some couples found out they could save over $25,000 a year if they divorced.
Think about that for a second. If you could save over $25,000 a year in taxes, you could take a trip to Italy, ski Deer Valley, put a little cash away for college, and still have some mad money to spend just by divorcing and turning their marriage into a long-term relationship.
As Marketwatch further reports, speedy divorce seekers beware: judges can deny you an expedited divorce if you are looking for a quick split – even if that would mean over $25,000 in tax breaks.
There are also a lot of risks though, known and unknown. Consider how a divorce will impact your relationship. There is no fake divorce. Once the court signs the final judgment, you are divorced. IRS rules regarding your filing status have something to say.
In addition, there are estate planning issues, retirement and social security complications, and many other issues besides the mere tax savings.
The Market Watch article is here.