Very often, couples who are divorcing amicably, or who have straightforward financial situations, will forgo meeting with a financial professional while they go through mediation. Though this may seem logical on its face, “going it alone” may result in unnecessary hardship and inaccurate calculations.
It is easy to simply look at a tax table today and say “I am going to be in the 35% tax bracket as a single filer, so I will just take 35% of my salary and that should be my federal tax.”
Well, not really. On an income of $300,000, 35% is $105,000 in federal tax. However, if you look at the table, the real tax is $80,193. Add to that the fact that the $300,000 income most likely did not take into account itemized deductions — or even the standard deduction (which is $12,200 for a single). That is another $4,270 in federal tax savings, so the total federal tax is really $75,923. And we haven’t even looked at state tax yet.
When we start to look at net after-tax cash flow and budgets, we now see how important it is to be as precise as possible. Remember: Alimony and child support are all after-tax dollars today.
These are just some things that you may neglect to take into consideration without the help of a neutral financial professional in your mediation.