Getting a divorce has always been a very expensive process. Due to the passage of the Tax Cuts and Jobs Act, however, soon-to-be exes in Arizona may find that divorce will be even more expensive if they separate after 2018.
There are number of provisions in the TCJA that will apply to divorcing couples. These provisions directly affect alimony and child support.
Spouses whose divorce agreements will be signed on or after Jan. 1, 2019, should be aware that alimony will no longer have any income tax consequences. Instead, it will be treated as a simple property transfer. Divorcees who have to pay alimony will no longer be able to deduct the amount they pay from their taxable income. On the other hand, those who receive alimony will not have to include those payments as part of their taxable income.
The tax law changes make alimony more of a disadvantage for divorcees who are payers. For the recipients of alimony, cash flow will be higher. However, it is believed that alimony amounts will be lower as the payers will have to take into account the loss of the deduction.
A family law attorney may help a client obtain favorable divorce settlement terms. The lawyer could evaluate the factors of a divorce and tell the client which legal strategies to pursue to resolve disputes regarding alimony and child support. Counsel could also be provided regarding how the passage of the TCJA might affect a particular divorce case and whether it is advisable to wait until 2019 to finalize the separation.