We talk about how “the law” is not a stagnant set of rules. Precedent is continuously being set by the courts and statutes, codes and regulations are consistently being added and amended by legislators. Traditionally, married couples have enjoyed tax breaks that the single or the divorced do not. That seems to be changing in 2013, and divorce may actually give individuals more of a tax break.
The first major change to lend favor towards divorce is what has become commonly known as Obamacare. More formally, the Patient Protection and Affordable Care Act makes amendments to the Medicare tax and the tax over a taxpayer’s net investment income. Specifically, the benefit for divorce lies in the way the thresholds are met.
For a single taxpayer, they are taxed 0.9 percent Medicare tax on wages and self-employment income that exceeds $200,000 and 3.8 percent on net investment income when adjusted gross income exceeds that same threshold. For a married or jointly filing couple, the threshold for both of these taxes is only $250,000.
Don’t be so quick to say that a married couple could just file separately. Should they choose this option, the married status drops their individual thresholds to $125,000 — exactly half of the married couples filing jointly threshold.
This isn’t the only change that is going to cost married taxpayers more and divorced taxpayers less. In our next post of this two-post series, we’ll talk about two other tax areas in which the changes will benefit those single taxpayers.
Source: Forbes, “Want To Save On Taxes? Get A Divorce,” Tony Nitti, Jan. 22, 2013