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Is San Francisco Too Expensive for Divorce?

The cost of living in San Francisco is notoriously high, more than 60% higher than the average in the United States. Some couples who have recently divorced in the San Francisco area have reached the hard realization that affording the cost of living in the area is significantly more challenging after a divorce.

Many people who think about moving to San Francisco find the cost of living prohibitive as the median home price in the area is more than $800,000 and the average cost of renting a one-bedroom apartment is more than $3,500 per month. The astronomical cost of living in San Francisco has led to a new trend of divorced couples choosing cohabitation instead of living separately. A divorced couple can save a tremendous amount of money by remaining in the same home for as long as possible. While this may not work in every situation, it can offer financial relief in one of the most expensive places to live in the country.

Why Cohabitate?

If a divorcing couple cannot afford to live separately, cohabitation as roommates can work for some people. A divorced couple essentially remains living together as roommates. If the couple has children and they can maintain a polite and civil atmosphere, this type of living situation is great for the couple’s children if they would have had to shuttle between two parents’ houses otherwise.

When a couple divorces and the two move into separate living arrangements, one may keep the family home while the other moves or the couple may sell the family home and split the sale price. While selling a home in the San Francisco area may lead to a substantial sale price, the divorcing couple must split it and may find they are unable to afford living in the area on their own.

Costs of Divorce

A divorce can influence the financial situations of ex-spouses in several ways. If one of the spouses earns much more than the other, the higher-earning spouse may need to pay alimony or spousal support to the lower-earning spouse. Due to the extremely high cost of living in San Francisco, alimony payments may be significant, and the new tax laws for alimony payments go into effect for divorces finalized on January 1, 2019. Payers will no longer have the option of writing off alimony payments as tax deductions, and payees no longer have to list alimony payments as taxable income.

After a divorce, an ex-spouse who moves into separate living arrangements may not be able to afford his or her basic expenses along with the cost of a divorce, such as the tax implications, child custody agreements, and other factors.

Get Help With Your Divorce

If you are expecting a divorce soon and you live in the San Francisco area, you need to have a firm understanding of how your divorce will influence your personal finances and your ability to live in San Francisco. Depending on when you finalize your divorce, the new tax laws may not influence your alimony payments if you meet the old laws’ requirements. A tax preparation service or qualified accountant can give you a more accurate idea of how a divorce will influence your tax obligation and the benefits of finalizing a divorce before 2019.

Due to the extraordinary cost of living in San Francisco, you want to carefully review your finances with your spouse to determine if a divorce is in your financial best interests. Many couples who intend to divorce may wind up in an informal arrangement that works better for all parties involved, but they remain legally married for financial benefits and easier expense management. Ultimately, each couple will try to make the best choices for their situations, but it is important to take the extreme cost of living in the San Francisco area into account for any divorce.