It is common for American couples to decide to divorce at the start of the New Year. This is because many people wish to make changes to the ways that they live their lives as the calendar changes over from one year to the next. However, Arizona residents should be aware that there may be benefits to finalizing some aspects of their divorces in 2018, rather than waiting until after the start of January.
One of the major changes that divorcing parties will experience is the way in which alimony payments are addressed in their taxes. Right now and through the end of the year, any alimony agreements that are created will follow the current taxation rules which allow payers to deduct such sums from their taxable income. But, once January rolls around and individuals sign off on their alimony agreements in the New Year, payers will not be able to deduct such payments from their incomes.
This may be a problem for payers who will be forced to live off of less income and not reap the tax benefit for lowering their taxable incomes. Payers also may find themselves pushed into higher tax brackets after the passage of recent federal legislation that restructures where certain incomes fall in the tax bracket structure.
Individuals who are currently paying alimony should know, though, that should they make changes to their agreements after the first of the year, they will retain their right to deduct their payments from their incomes. Modifications to existing alimony agreements will not change the tax deduction rights of men and women who are required to provide their exes with financial support.