Arizona residents who are considering getting a divorce should be aware that the new tax laws could impact the financial outcome of a separation. Couples should consider certain factors before deciding whether it would be prudent to obtain a divorce in 2018 or wait until the next year.
One significant change that will occur with the new tax law is how alimony will be treated. For years, individuals who have had to pay alimony could deduct the amount from their taxable income, and individuals who received alimony have been required to include it as part of their taxable income. Beginning with new divorces in 2019, the payor will not be able to deduct the alimony they pay, and the recipients will not have to include it in their taxable income. This change is likely to result in some spouses receiving less alimony.
For a couple that opts to finalize a divorce in 2018, alimony will still be deductible to the payor and taxable to the recipient. If the divorce agreement is modified in the future, the treatment of the alimony will remain the same unless terms are added to the agreement that explicitly state the new law will be applied.
What happens with the family home can also be a source of contention for many divorces. With the passage of the new law, it will be more expensive to retain ownership of the home. This is because the amount of deductible property taxes will be reduced.
A divorce attorney may work to protect the interests and rights of a client during a high-asset divorce. Litigation may be used to obtain favorable settlement terms regarding asset division and alimony.