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Illinois Adjusts Spousal Maintenance Law Ahead of Tax Changes

Posted on in Spousal Maintenance

Illinois Adjusts Spousal Maintenance Law Ahead of Tax ChangesIllinois recently passed a law that changes the formula and court instructions for calculating spousal maintenance as part of a divorce. The law goes into effect at the start of 2019, which is the same time that a federal tax law eliminating the alimony deduction goes into effect. Illinois is adjusting its spousal maintenance law because the tax law will put a greater burden on people paying maintenance. Since the new tax law was announced, lawyers have warned divorcees that it may become more difficult to reach a spousal maintenance agreement if the payor cannot use the alimony deduction. Illinois’ new law will try to make court decisions on spousal maintenance more equitable for both spouses.

Alimony Deduction

Any spousal maintenance agreements approved before the end of 2018 are still eligible for the alimony tax deduction, and payors under existing maintenance agreements can continue claiming the deduction until a change of circumstances requires them to modify the agreement. With the alimony deduction, payors can deduct the full value of their annual maintenance payments from their federal income taxes. Payees must report the maintenance that they receive as taxable income. When the deduction is eliminated, the payor will save less on his or her taxes, and the payee will not pay taxes on his or her maintenance.

Illinois’ Response

Divorcees may be less likely to reach a spousal maintenance agreement on their own because the alimony deduction was an incentive for the payor to agree to larger maintenance payments. Illinois’ new maintenance law tells the courts to consider the tax consequences for each party when deciding on spousal maintenance. It also changes the spousal maintenance formula so that the courts:

  • Use net income instead of gross income; and
  • Calculate maintenance as 33 percent of the payor’s annual net income, minus 25 percent of the payee’s annual net income.

Net income better reflects the actual incomes of the parties because it accounts for the deductions taken out their wages. The law recognizes that payors should pay less maintenance if they can no longer deduct the payments from their taxes.

Importance of Maintenance

Illinois divorce law does not require you to include spousal maintenance in your divorce agreement, but a court will likely award it if there is an income disparity between you and your spouse. It may be advantageous to settle your maintenance agreement before you go to court. A DuPage County divorce attorney at Calabrese Associates, P.C., can help you reach a fair maintenance agreement with your spouse. Schedule a consultation by calling 630-393-3111.


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