Is Alimony in Arizona Taxable Income?
Taxation of Alimony in Arizona Through 2017
Our clients often ask is alimony in Arizona taxable income. As of 2017 and before, alimony in Arizona is taxable as income by both the federal government and the State of Arizona. It is treated very similarly to earned income from employment.
The person receiving the alimony in Arizona is solely responsible for paying those income taxes. The party paying the alimony in Arizona, correspondingly, is permitted to deduct those spousal maintenance payments from his or her income for income tax purposes.
Taxation of Alimony in Arizona in 2018 and Beyond
However, that is all going to change in 2018 due to significant changes in federal tax law. All alimony orders issued prior to January 1, 2018, will continue under the old system whereby the person receiving the alimony will pay income taxes on the amounts received and the spouse paying the alimony will continue to deduct those alimony payments from his or her income.
However, all alimony orders issued in a divorce or legal separation decree entered by the court after January 1, 2018, will not be taxable to the recipient or tax deductible by the payor of the alimony.
Taxation of Alimony and the Recapture Rule
There are some exceptions to the tax deductibility under the federal Recapture Rule when a lump sum alimony payment is made to a spouse. If you are considering a lump sum payment of spousal maintenance, you should contact a qualified Certified Public Accountant to discuss if the Recapture Rule applies to you.
Chris Hildebrand wrote this article about the taxation of alimony in Arizona to ensure everyone has access to information about alimony laws in Arizona. Chris is a family law attorney at Hildebrand Law, PC. He has over 24 years of Arizona family law experience and has received multiple awards, including US News and World Report “Top Arizona Divorce Attorneys”, Phoenix Magazine “Top Divorce Law Firms”, and Arizona Foothills Magazine “Best of the Valley” award. He believes the policies and procedures he uses to get his clients through a divorce should all be guided by the principles of honesty, integrity, and actually caring about what his clients are going through.