Legal Separation and Taxes in Arizona
Understanding a Legal Separation in Arizona
You first need to understand what a legal separation is before we can address the effect of legal separation on state and federal income taxes.
A legal separation can only be granted by a judge of the Superior Court in which you or your spouse resides.
Unlike a divorce in Arizona, there is no specific time limit for you to establish residency in the state of Arizona before you can be legally separated.
You simply need to be a resident of Arizona at the time you file for legal separation; even if you have lived in Arizona for only one day.
A legal separation is, in almost all other ways, similar to a divorce. In a divorce or a legal separation, the court must do the following:
- Divide all of your property and debts, including tax debts;
- Decide whether spousal support is appropriate;
- Enter orders providing for the care and custody of your children;
- Enter appropriate orders for the payment of child support;
In fact, the only difference between a divorce and a legal separation is that you are not restored to the status as an “unmarried” person in a legal separation.
In a divorce, you would be restored to the status as an “unmarried” person and are free to remarry in the future.
Sole and Separate Tax Debt Versus Community Property Tax Debt
All debts, including taxes, incurred during a marriage are considered to be community debts in Arizona.
For example, an income tax debt incurred from income earned by a spouse during a marriage is a community income tax debt. Both spouses will be equally responsible for paying that tax debt.
The presumption that all debts, including taxes, are community debts can be overcome by presenting clear and convincing evidence a debt is the sole debt of one of the spouses.
For example, if a spouse sells a home he or she owned prior to marriage resulting in a capital gains tax, that tax would be that spouses sole and separate tax obligation.
Effect of a Legal Separation on Taxes in Arizona
Arizona is a community property state.
If you live in Arizona at the time a legal separation case is filed, the court will apply Arizona community property laws when dealing with tax debt.
A legal separation “terminates” the marital community as of the date the Petition for Legal Separation is served on the other spouse so long as the legal separation case is not dismissed before a Decree of Legal Separation is issued by the court.
As a result, any income tax or other forms of tax either you or spouse incurs after the Petition for Legal Separation is filed and served on the other spouse will be the sole tax debt of the spouse incurring the debt.
There are, however, exceptions to this general rule.
One exception would be income earned by a spouse prior to the filing of the legal separation case that is paid after the Petition for Legal Separation is served on the other spouse.
The key to determining whether a tax obligation is a community debt or the sole and separate tax debt of the other spouse is when the right to receive the income occurred regardless when it was actually paid to that spouse.
Filing Federal and State Income Tax Returns During or After a Legal Separation in Arizona
Many people have questions about how to file state and federal income tax returns after a legal separation is filed and after the final Decree of Legal Separation is issued by a court.
Your ability to file a joint return with your spouse will depend upon the date the final Decree of Legal Separation is issued.
Until such time that a final Decree of Legal Separation is signed by the judge and filed with the clerk of the court, you are still considered by the IRS to be married.
Filing Tax Returns While a Legal Separation Case is Pending
Despite the fact Arizona law terminates the “community” immediately upon service of the Petition for Legal Separation on the other spouse, federal income tax laws still consider you to be married.
Therefore, a person who is currently involved in a legal separation case in Arizona can still choose to file joint state and federal income tax returns to save money on taxes.
However, there is nothing stopping someone involved in a legal separation case from filing as “Married Filing Separately”.
If someone chooses to file his or her taxes as “Married Filing Separately” while a legal separation case is pending, they run the risk of increasing the total income tax owed because they lose the benefits of filing a joint income tax return as a married couple.
Filing Tax Returns After a Legal Separation Case is Finalized
You are considered “legally separated” in Arizona when the judge signs a final Decree of Legal Separation and files that Decree with the clerk of the court.
At that point, you may no longer file tax returns under the status of a married person; whether that be filing as “Married Filing Jointly” or “Married Filing Separately”.
Stated differently, you lose the ability to file income tax returns as a married couple in the year your legal separation case is finalized.
You may still file tax returns as “married” in all prior income tax years prior to the year in which your Decree of Legal Separation is filed.
Call us at (480)305-8300 to schedule your personalized consultation with one of our experienced Arizona legal separation attorneys today!
More Articles About Legal Separation in Arizona
- Arizona Legal Separation Laws
- Legal Separation Versus Divorce in Arizona
- Benefits of Legal Separation Arizona
- Convert Legal Separation Into A Divorce During the Case in Arizona
- The difference in Divorce and Legal Separation in Arizona
- How Long Can You Be Legally Separated in Arizona
- How Long Does a Legal Separation Take in Arizona
- How to Start a Legal Separation in Arizona
- How to Stop a Legal Separation in Arizona
- What Reasons Do I Need to Obtain a Legal Separation in a Covenant Marriage in Arizona
Chris Hildebrand wrote this article about legal separation and taxes in Arizona to ensure everyone has access to information about legal separation 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. The procedure he uses to get his clients through a divorce furthers our principles of honesty and integrity. Chris and his staff care about what their clients are going through in a divorce.