If you are seeking spousal maintenance as part of divorce proceedings in Illinois this year, you should know that changes to laws governing spousal maintenance at both the state and federal level have recently gone into effect. The changes could have an impact on the amount that you either receive or pay, as well as how you pay taxes on it.
According to Chicago Woman, recent changes to Illinois state law affect how long spousal maintenance lasts and the income threshold at which the maintenance formula applies. As of 2018, the law changed to incorporate more gradual increases to a potential maintenance award based upon the duration of the marriage. To allow for these increases, there were also changes made to the calculation of maintenance duration.
Another important change at the state level involves the application of the maintenance formula to high-asset couples. Beginning in 2018, the maintenance formula applies to all couples whose combined gross annual income amounts to less than $500,000. This is an increase from the previous threshold of $250,000.
At the federal level, the Tax Cuts and Jobs Act that took effect on Jan. 1st, 2019 changes the way the Internal Revenue Service taxes spousal maintenance payments. For divorces filed subsequent to the date that the law went into effect, the party receiving spousal maintenance is not required to pay taxes on it, while the party paying maintenance is. This represents a complete reversal of the way the government taxed spousal maintenance in the past: payments were deductible for the payer but counted as taxable income for the recipient.
Because the Tax Cuts and Jobs Act went into effect only recently, it is not yet clear what the long-term consequences will be. Illinois lawmakers may choose to update the maintenance formula to reflect the changes to the federal law, but that remains uncertain. Meanwhile, divorce negotiations could become more contentious as the party responsible for paying spousal maintenance will no longer have the tax deduction as an incentive to agree to the arrangement.
The information in this article is not intended as legal advice but provided for educational purposes only.