Lots of people would be happy to save money on taxes. However, not everyone is willing to go through a divorce in order to do so. The so-called “marriage penalty” has some Illinois couples, especially high-earning ones, talking about the potential benefits that would come from divorcing on paper.
Getting a divorce in order to save money is sometimes referred to as a strategic divorce. After the Tax Cuts and Jobs Act went into effect in 2018, couples who fell into the 37% tax bracket were required to pay higher taxes than individuals who made the same and filed their taxes as single individuals. While the IRS sees individuals being better off as single, there is a lot more at stake.
There may be some tax savings involved if a couple were to divorce. However, they could take major financial hits in other places, like when it comes to their retirement benefits. Other areas in which they could end up losing money by getting a divorce could be life insurance policies, health care policies that cover the entire family and business interests. It is good to have all the facts before making a decision.
In addition to saving money on taxes, some couples look at divorce as a way to save money when it comes to getting Medicaid. If one spouse is ill, and together, they have too many assets to qualify for Medicaid, getting a divorce could be a potential solution to the financial aspect of getting nursing home care.
A divorce is not something that couples will want to take lightly. Some have decided to speak with an attorney before making their decision. A lawyer may provide legal advice that could help the couple understand how a divorce would impact their family financially and provide practical assistance, like filing divorce papers.