‘Gray divorce’ is becoming more common.
A ‘gray divorce’ is when a couple over 50 decides to end their marriage. While the divorce rate has leveled off in certain age groups in recent years, the picture is bleaker for older couples. According to some studies, divorces among those over 65 have quadrupled in the previous 25 years.
We’ve seen real-time examples of this on social media. Microsoft founder Bill Gates and his wife Melinda declared the end of their 27-year marriage in May 2021. Jeff Bezos, founder and former CEO of Amazon, and his wife McKenzie split in 2019 after 25 years of marriage.
While divorce may be traumatic at any age, it can be especially tough for older couples, wreaking havoc on their mental and financial well-being. Moreover, tax implications for late-life divorce range from alimony to who can claim the children on their taxes.
Here are five tax tips for the recently divorced and retired:
1. Recognize the whole impact of divorce on your taxes.
If you’re going through a divorce, you should first figure out the consequences. So, what does a divorce entail for me and my taxes? This may represent a substantially smaller tax burden for some people than they were used to, at least in terms of proportion.
Other people may have a substantially greater tax burden as a result. It’s critical to understand that if you’re married, you’ll be submitting a joint income tax return a lot of the time, if not the majority of the time. And this takes part of a higher earner’s income and perhaps divides it evenly among that person’s and a lower earner’s income.
2. Filing as a single person may place the higher-income taxpayer at a higher tax rate.
If you divorce, you may wind up filing as single, putting you in a higher tax rate bracket.
3. Alimony is no longer deductible, which affects higher-income earners.
Be aware that alimony is no longer deductible as of 2019. And we all know that the individual usually pays alimony with the higher income. As a result, the person with the higher income and the higher tax rate is now paying money to someone with a lower tax rate without receiving a deduction.
4. Determine who will claim the children.
Of course, when children are involved, we must consider who is claiming the children. Is it possible for only one individual to claim them each year? Do you turn it off every two years? That can influence your filing status, the credits you can claim, and the deductions you can claim.
5. Consult with a tax professional to see how the divorce may affect you.
The first step is to get your tax professional to prepare a fictitious tax return to assess how the divorce would affect you.
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Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].
