A significant change to the tax law regarding maintenance will pose a significant impact for divorcing couples in 2019.
Maintenance has traditionally been a tax deduction for the payer and taxable for the recipient. This arrangement in the tax law will conclude this year.
Beginning 2019, the payor will no longer be receiving a deduction. This change does not only negatively impact the payor; recipients will be burdened as well. Because the combined amount taxes being collected from both payor and recipient is higher, this in turn reduces the the overall support for the children. Additionally, changes in the tax law AND the Illinois’ adjusted maintenance guidelines, calculated payments will take into account the lost tax deductions, therefore payments to recipients will be reduced. Calculations will be made based on the couple’s NET Income instead of GROSS Income.
Keep in mind that these changes will only affect future judgements made in 2019. therefore it is advisable that parties involved in a divorce where maintenance is involved should settle in 2018.
Judgements of dissolution of marriage entered prior to 2019 will not be affected. Nor will any modifications or extensions made to your maintenance.
These tax changes will not affect any orders for unallocated support already in place, even if there are changes made in the future.
Child support will not be affected. It will remain not taxable or deductible for either party.
Remember that the experienced and knowledgeable team at Vaclavek Hartman Vaclavek, P.C. are here to help and guide you to the best position regarding all facets of divorce and family law; every step of the way.
Contact us anytime to discuss your specific situation.