‘Gray divorce’ is on the rise.
A ‘gray divorce’ refers to when couples over the age of 50 end their marriage. And while the divorce rate in some age groups has flattened in recent years; the numbers are grimmer for older couples. There are some reports that say divorces over the age of 65 have tripled in the last 25 years.
We’ve seen examples of this play out in real-time on social media. In May 2021, Microsoft ( (MSFT) – Get Microsoft Corporation Report) founder Bill Gates and his wife Melinda announced that they were ending their 27-year marriage. After 25 years of marriage, Amazon’s ( (AMZN) – Get Amazon.com, Inc. Report) founder and former CEO Jeff Bezos and his wife McKenzie divorced in 2019.
While divorce at any age can be difficult, It can be especially difficult for older couples, taking. atoll on both emotional and financial well-being. Late-life divorce also has a number of tax considerations from alimony to who can claim the children on their taxes.
Recommended Read: Divorce & Taxes 101: Filing Taxes After Divorce
5 Tax Tips for Recently Divorced and Retired (Gray Divorce)Understand the total impact divorce has on your taxesFiling single could push the higher-income earner into a higher tax bracketAlimony is no longer deductible, impacting the higher income earnerDetermine who claims the childrenAsk your tax professional to see how the divorce might impact youWatch the video above. TheStreet’s Robert Powell discusses that and more with Jeffrey Levine, CPA and nationally recognized thought-leader within the financial planning community.
Recommended Read: Top 3 Tax Tips for Single Parents
Quotes| Here’s What ‘Gray Divorce’ Means for Your Taxes Jeffrey Levine, Chief Planning Officer, Buckingham Strategic Wealth Jeffrey Levine, Chief Planning Officer, Buckingham Strategic WealthVideo Transcript:Robert Powell: Welcome to TheStreet’s tax tips with Jeffrey Levine from Buckingham Wealth Partners. Alright, so we’re living in a day and age of what’s called the great divorce. What tax tips do you have for those who are recently divorced?
Jeffrey Levine: Well, if you’re going through a divorce, the first thing you want to do is understand what the impact is going to look like. Right, what does getting a divorce mean for me and my taxes? For some individuals that might mean a much lower tax bill than they were accustomed to before, at least on a proportional basis.
For other individuals, it can mean a much higher tax bill. It’s important to realize that while you’re married, a lot of the time, or most of the time, you’re going to be filing a joint income tax return. And that takes some of a higher earner’s income and potentially spreads it, if you will, equally across that person and a lower earner’s income.
If you have a divorce, you may end up filing single, and that could push you into higher brackets, and, on top of that Bob, since 2019 alimony is no longer deductible. And we know that, generally, the person with the higher salary pays the alimony. And so that person with the higher income and the higher income tax rate is now paying money to a person with a lower tax rate without getting a deduction for it.
Of course, when there are children involved, we have to look at who’s claiming the children. Does one person get to claim them every year? Do you switch it off every other year? That can impact your filing status, the credits that you are able to qualify for, and what deductions you’re able to receive. So the first thing to do is to go forward and ask your tax professional to do a pretend tax return to see how that divorce might impact you.
Robert Powell: Jeffrey, thanks for those tax tips, and we know that we have some more in store for our viewers in the weeks and months to come.
Jeffrey Levine: Well, I look forward to it and joining you and answering some more reader questions.
Editor’s note: Video produced by TheStreet’s Zach Faulds