Family Law | End-of-Year Divorce Can Have Financial and Personal Benefits
The end of the year brings about a time of hope for new beginnings and a fresh start in the coming year. For some people, it means making resolutions to lose weight, be healthier, find a new job or return to school. For others, it means coming to terms with the fact that a marriage needs to end. The holiday season may not seem like the best time to divorce, but doing so not only primes you for that fresh start once the new year arrives, it can also have significant tax benefits.
Of course, this doesn’t mean that you have to file before December 31, but it should be a consideration if you have already been thinking about divorce.
The potential financial benefits
The traditional way of thinking is that simply being married provides tax benefits. Is it really possible to gain positive financial results by divorcing? In a word: Yes. For some couples, divorcing this year makes better financial sense than waiting another year. This is particularly true of couples with higher incomes, especially in light of next year’s arrival of premiums associated with the Patient Protection and Affordable Care Act (PPACA, sometimes known as “Obamacare”).
Why? Because under the PPACA, insurance premiums for self-insured married couples are calculated based on the couples’ combined gross income, but there are tax credits given to those who fall below certain income thresholds. Those credits are only eligible for those people whose combined income is less than $93,200 annually. Should those people remain married, they might see a quarter or a third of their disposable income eaten up by insurance premiums; filing for divorce will lessen their premiums significantly, resulting in a huge savings.
In addition, other tax credits and benefits implemented by President George W. Bush have now expired or were repealed during the notorious “fiscal cliff” negotiations of early 2013. This means that those people making more than $400,000 ($450,000 per married couple) will lose out on important tax credits, deductions and exemptions, thus dramatically increasing their overall tax burden. Should those couples divorce, they will have the benefit of credits and deductions offered to unmarried individuals with similar annual gross income.
The decision to divorce should not be driven solely by financial considerations even though they play an important role. Other factors, including the personal happiness of the parties and their children, must also be taken into account.
If you have been considering filing for divorce, why are you waiting? Are you staying together because of your children or worried about how child custody or child support disputes would play out if you split up? Starting the new year fresh as a single person, and setting off on a path toward happiness and personal growth, is often the best thing to do for everyone involved.
Do you have questions about how a divorce could impact you? Are you concerned about the possible tax implications of either staying together or splitting up? Would you like to learn more about ending your marriage? If so, don’t wait; contact an experienced family law attorney in your area today.