Timing a Divorce for Tax Purposes

Taking into account that the end of the year is approaching and almost every financial blog talks about ways to save on taxes it seems highly worthwhile to point out potential tax savings by appropriately timing a divorce date. Thus it is suggested that you speak to your local or Virginia divorce lawyer in further detail about this topic. The primary fact to point out is that tax status is in part determined by the current marital state on the last date of the year. It makes no difference if you were married for the entire year and the divorce only became final on the last date of the year. As far as Uncle Sam is concerned you were single for the entire tax year.

Thus for those still on somewhat positive terms with the other party have a final hearing date scheduled for the end of the year, the individual may wish to postpone that date till after the first of the year. This is generally due to the simple fact that there are many tax savings that are afforded to those who are married than those who are single.

Taking a look a hypothetical scenario let us consider Joe and Jane are debating whether to finalize the divorce before or after the New Year. They have one child and each individual works with salaries of $36,000 per year and $30,000, for a combined income of $66,000. This would place the couple in the 15 percent tax bracket and the likelihood of a higher deductible. However, by filing as single, one party likely could fall in the 25 percent tax bracket, while the other remains in the lower. The end result often is that more taxes are paid to Uncle Sam. Thus Joe and Jane may wish to ensure the divorce is finalized after the New Year. I will not attempt to estimate the savings as they can vary dramatically dependent on each situation. That said, from a purely financial prospective this is often one of the best moves a couple about to divorce can make in order for each party to realize tremendous savings.

Thus it is suggested to speak both with a tax professional and a divorce lawyer to go over your situation. The savings are likely tremendous relative to any other changes the impact tax payments. Therefore, I suggest all readers to perform their own research and then speak to qualified professionals before making a Virginia divorce final at the end of a calendar year.

Bookmark to: