Changes to the Tax Treatment of Spousal Maintenance in 2019

Illinois Family Law Changes 2019

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Updated on:
May 6, 2019

In this article we will explain changes to Illinois family law for 2019.  2017 and 2018 brought major changes to Illinois child support laws. In 2019, the changes to Illinois family law are occurring in the area of spousal maintenance, also known as alimony.  For a more comprehensive discussion of these changes, check out our article: Changes to Illinois Spousal Maintenance Law in 2019.

Changes to the Tax Treatment of Spousal Maintenance in 2019

Prior to 2019, spousal maintenance payments were tax deductible for the payor and counted as income for the purpose of the recipient’s income tax.  A new federal tax law has reversed the tax implications of maintenance payments. For maintenance orders entered after January 1, 2019, maintenance payments will no longer be tax deductible for the payor and will no longer count as income for the purposes of the recipient’s income tax.

The greatest beneficiary of this change is expected to be the federal government.  Because payors of maintenance tend to be in higher tax brackets than recipients, the government stands to collect more in taxes now that the maintenance payments are no longer tax deductible to the payor, even though they are no longer taxable as part of the recipient’s income.

The other expected implication is that when courts deviate from statutory guidelines in determining the amount and duration of maintenance, we expect them to order smaller maintenance awards than under the previous tax law.  The tax implication of maintenance payments for each party is one of the factors that courts use in determining whether maintenance is appropriate, whether to deviate from statutory guidelines, and how much to award when courts do deviate from the guidelines (more on these factors: Illinois Spousal Maintenance Explained).  When spousal maintenance payments were tax deductible for the payor, this was a reason courts used to award higher spousal maintenance payments.  Now this reason no longer exists.

For more on the impact of the new tax law, check out our article: Changes to Illinois Spousal Maintenance Under the 2019 Tax Law

New Threshold for Application of Statutory Guidelines for Spousal Maintenance in 2019

2019 Alimony Payments in Illinois Explained
Illinois 2019 Law Changes Explained

When a court determines that spousal maintenance is appropriate, the next determination they must make is whether to apply statutory guidelines.  Generally, statutory guidelines will be applied if the parties’ combined gross income is below a certain threshold and neither party pays child support or maintenance payments to a third party.  If the parties’ gross income is above this threshold the court is free to deviate from the guidelines without stating a reason for such deviation in its order.  The court almost always deviates by awarding larger maintenance payments than the guidelines would require.

Prior to 2019, the threshold was a combined gross income of $250,000.00, now the threshold is a combined gross income of $500,000.00.  This means that the guidelines will be applied in more instances, and that many parties who, under previous law, would have paid larger amounts of maintenance based on high incomes will not do so.

Changes to How the Amount of Maintenance is Calculated in 2019

Prior to 2019, the amount of spousal maintenance payments was calculated by subtracting 20% of the recipient’s gross income from 30% of the payor’s gross income.  For maintenance orders entered after January 1, 2019, the amount of spousal maintenance will be calculated by subtracting 25% of the recipient’s net income from 33.33% of the payor’s net income.  For more on this check out our article, How to Calculate Illinois Spousal Maintenance in 2019.

Changes to the Duration of Spousal Maintenance Payments in 2019

The duration of spousal maintenance is determined by multiplying the number of years of the marriage by a percentage, which increases as the duration of the duration of the marriage increases. Prior to 2019, this multiplying factor greatly increased in five-year increments.  For orders entered after January 1, 2019, the percentage increases more gradually in annual increments.  Depending on the length of your marriage, the duration of maintenance payments may be slightly shorter under the new law. More on this: How is the Duration of Spousal Maintenance Determined in 2019?

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Changes to the Tax Treatment of Spousal Maintenance in 2019
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Changes to How the Amount of Maintenance is Calculated in 2019Changes to How the Amount of Maintenance is Calculated in 2019Changes to the Duration of Spousal Maintenance Payments in 20192019 law changes in Illinois2019 alimony law2019 spousal maintenance
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