Does tax code lead high-earning couples to divorce?

A number of United States tax laws that recently passed have heavily favored single individuals over married couples. While growing tax responsibilities might not be the sole reason for couples to file for divorce, those who were on the fence about a marriage just might find reason enough to call it quits now.

One thing is for sure; single men and women now have a greater financial advantage under the U.S. tax laws than their married counterparts.

This especially rings true for the top 1 percent of earners in the country. While the rest of the country will be paying the same income taxes this year as they did last year, the top 1 percent saw their tax rates jump from 35 percent to 39.6 percent.

Married couples within the top 1 percent are hit hardest. They will be forced to pay 39.6 in taxes on all taxable income over $450,000. Disproportionately, single individuals will pay the same rate for taxable income that eclipses $400,000.

For instance, if a husband and wife both made $350,000 a year, their total income would be $700,000, in which $300,000 would be taxed at the maximum rate. If they were divorced, neither would eclipse the $400,000 mark, so they would not be taxed at the maximum rate.

We see a similar trend in taxes tied in with the Patient Protection and Affordable Care Act. Earners will pay a 0.9 percent Medicare tax on wages and self-employment income and 3.8 percent on a net investment income when both amounts exceed a certain threshold. This threshold is once again disproportionate – $200,000 for singles and $250,000 for a married couple.

Finances are often a big factor in deciding whether to pursue a divorce or not. In the climate of today’s tax laws, it certainly would not hurt a high-earning couple to divorce.

Source: Forbes, “Want To Save On Taxes? Get A Get Divorce,” Tony Nitti, Jan. 22, 2013