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Potential tax reform could have significant impact on divorce

In a divorce, there are many different concerns for Arizona residents. The focus in divorces that involve children will rightfully be on child custody, support and visitation, while all divorces will include concerns about property division. But, one aspect of divorce that may be an afterthought is how the divorce will impact a person's tax situation.

Our readers have probably seen the news about tax reform efforts that are currently underway in Washington, D.C. A recent article noted that some of the potential reforms may have a significant impact on divorce.

As the recent article noted, one of the changes that is being proposed is to eliminate the tax deduction that people receive for paying alimony. Also, the recipient spouse would not be required to pay taxes on alimony payments. It remains to be seen whether or not this proposed change will make it into any final product of tax reform from Congress. But, if it is, the change would be an important factor for divorces that occur after the tax reform legislation is passed.

Perhaps the biggest impact of tax reform on divorce would be the proposed changes to tax brackets. Many married couples file their taxes jointly. After the divorce, the two ex-spouses will be single again. Thus, their income will likely fall into a different tax bracket. Although the tax reform legislation is far from finalized, there are some significant changes to the current tax brackets being proposed. Married couples in Arizona who are thinking about a divorce would be wise to continue to monitor the proposed tax reform efforts to see how the changes could impact them.

Source: Forbes, "How Tax Reform Could Radically Change Divorce," Malcom S. Taub, Nov. 9, 2017

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