Making Necessary Financial Adjustments
Divorce leads to many changes in one’s life, but one thing that does not change is the legal requirement to pay taxes. Taxes are one of the few certainties in life, but what may not be as certain is one’s tax liability. This can change after a divorce, so it’s important to know what may change when the process is complete.
Tax Liability via Filing Status
Perhaps the most obvious change to one’s taxes would be to update the filing status. Divorced individuals are no longer married and, therefore, cannot claim the tax benefits of filing “married filing jointly.” They must now file “single.”
Changing this filing status does come with other implications to be aware of. Reviewing the tax brackets for “married” and “single” filers, one can see that the tax brackets for “married filing jointly” is approximately double that of “single” filers. This means that going to the “single” brackets could increase or decrease one’s tax liability depending on their unique financial circumstances. This also means that the standard deduction is lowered, meaning one may see an increase in their taxable income.
A divorce may also mean a change in your withholding status or how much is taken out of your paychecks. Individuals who withhold as a single filer actually have more money taken out of their paychecks for taxes than married couples do. If you were withholding at the married level and change your status to single, more money will be withheld from each of your paychecks; however, this could lead to a refund when it’s time to file.
Be sure to consult with your local tax professional to ensure you are making the wisest decision.
Ask Questions of Your Attorney
If you are unsure of how divorce will affect an area of your life, whether that be financial or otherwise, be sure to consult with your divorce attorney to gain the most accurate knowledge. At The Law Office of Derek S. Ritchie, PLLC, our team can help you look to the future to understand life after divorce and how best to plan ahead.
The material shared in this blog is for informational purposes only and should not be used or relied on as legal, financial, or tax advice. You should consult with your local tax professional before making any decision related to your financial situation.