Divorce agreements and the new tax code

On Behalf of | Dec 13, 2019 | Family Law

If you and your spouse in Arizona have decided that it is time to end your marriage, you will now need to turn your attention to the logistics involved in separating your intertwined lives. A divorce touches every part of your life today and in the future and the decisions you make at this time should be made with a clear understanding of the long-term impact they may have for you. 

If spousal support is something that may be relevant to your situation, you should know that the tax law that went into effect this year dramatically changed how these payments are taxed. As Forbes explains, instead of the person who receives alimony paying taxes and the person who pays alimony deducting that money from their tax return, the tables are flipped. The paying spouse also must pay income tax on the money. 

When looking at your entire divorce settlement, the option to include alimony may end up reducing the overall marital assets. It is wise to assess this decision in light of things like how child tax credit now works to identify the best agreement for your entire estate. You may find that making or receiving spousal support is less advantageous to you that other agreements you and your spouse might work out. 

If you would like to learn more about the factors that you and your spouse should evaluate when assessing your divorce settlement in light of the new tax laws, please feel free to visit the marital asset separation and taxation page of our Arizona family law and divorce website.