Are you ready for the “huge” changes the Tax Cuts And Jobs Act could have on your divorce? Finishing your divorce in 2018 instead of 2019 could have a big impact on your bottom-line. The key is spousal support (aka spousal maintenance and alimony). Whether you are paying or receiving–divorcing spouses should keep an eye on the calendar.
Currently, spousal support is deductible for the paying spouse and taxable income to most receiving spouses. For some, the tax benefits soothed the pain of paying support. For the recipient, the impact was often less dramatic because of a smaller over-all tax burden. Now in 2018 you must be careful. If your case concludes after December 31, 2018, the paying spouse will no longer be eligible to deduct spousal payments for income tax purposes.
Divorces can be a complex process, especially if spousal support is an issue. All divorces are at the mercy of the court’s calendar. Arizona law mandates a 60-day cooling off period between the date one of you receives the initial “papers” called a Petition For Dissolution, and the date the Judge signs off on the final divorce by agreement, called a Consent Decree. Two months to get past any residual animosity and come to a final agreement is too quick a pace for many.
Even the most agreeable parties might not be able to get everything signed in time to take advantage of the 2018 tax laws unless they file their Petition early this summer. The mountain of final Consent Decrees submitted by parties who resolved their issues and just need a judge’s signature is enormous every December, and many are returned with a January date, and that’s in a normal year. Once the papers are turned in, there is nothing you can do to speed up the judge’s signature.
This year, I recommend considering November 1st a drop-dead deadline for submitting a signed final divorce agreement—Consent Decree—if you want to take advantage of the 2018 tax laws. That suggestion could be too late this year! When someone asks me “how long will it take?” I invariably respond, “longer than you think.” This isn’t the year to try to get everything completed under the wire.
Remember, I am an Arizona family law attorney and not a tax attorney. This isn’t even legal advice for you; it is too generalized for that, and I’m not your lawyer. You should discuss any potential divorce settlement with a tax advisor. The message here is—if income tax deductions matter to you, 2018 is very different from 2019– talk to a tax advisor, and a lawyer.
Tonya Macbeth is a shareholder at Burch & Cracchiolo. Her practice focuses on Family Law.