Obamacare Adds New Tax Implications to Getting Divorced


After a divorce in Pasadena, it's important to spend some time thinking about how your tax bill will be affected by your change in filing status.

Alimony is tax deductible for the person who is paying it and taxable income for the person who is receiving it. Child support, however, is not tax deductible for the person paying it or taxable income for the person who receives it. Tax credits relating to minor children generally go to the person who is the custodial parent.

The roll out of Obamacare could also affect your tax bill. To pay for the cost of providing subsidies to lower income uninsured people, the law phases in several taxes on individuals and employers. Some of these taxes come with a marriage penalty. For example, there will be an additional 0.9% Medicare tax on earned income over $200,000 for single filers and over $250,000 for married couples filing joint returns. This means there will be a new marginal Medicare tax of 2.35% on earned income for high earning taxpayers.

There will also be a new net investment income surtax of 3.8% over the modified adjusted gross income threshold of $200,000 for single filers and $250,000 for married tax payers filing joint returns.

If you were married to a spouse who also worked full time and you both had similar incomes, your divorce could prevent you from being affected by either of these new taxes. For example, two working adults with incomes of $125,000 per year as well as additional investment income would both pay nothing in extra taxes if they were single. As a married household, they'd see their tax bill rise significantly.

Tax filing status is determined by your marital status on the last day of the year. If you are divorced on December 31, you can file as a single person for the entire year.

How Can We Help?

If you are in need of assistance with a legal issue relating to your divorce, please call our office at (626) 683-8113 or email us at info@PasadenaLawOffice.com. Our Pasadena divorce law firm is eager to help in any way possible.