Legally dissolving a marriage is about to get much more difficult. Enacted by the Illinois legislature on August 17, 2018, the new law goes into effect January 1, 2019.
Huge changes are pending for the Illinois spousal maintenance law, which is the formal term to describe alimony and spousal support. Section 504 of the Illinois Marriage and Dissolution Act (IMDMA) deals with the legal issue of spousal support after a judge grants a divorce. This is a dramatic turn of legal events for any couple currently involved in negotiating dissolution to their marriage. If maintenance has emerged as a significant factor in resolving your divorce case, then you should seek out the legal expertise of a licensed and experienced divorce attorney before the clock strikes midnight on December 31, 2018.
Overview of the IMDMA
Introduced by Democrat State Senator Michael Hastings of Tinley Park and Democrat State Representative Kelly Burke of Oak Lawn, the maintenance amendment written into the IMDMA will change the percentage that state law uses to calculate how much alimony must be paid annually. The amendment also includes a second big change: Family law judges will use each marriage party’s net annual income after taxes to calculate maintenance costs. The current calculation factors in each marriage party’s gross income.
Current Statute Concerning Alimony and Taxes
Any divorce entered into the legal system before January 1, 2019 allows the payer to deduct divorce maintenance costs when completing a state income tax form. The spouse receiving alimony includes maintenance as income for state tax purposes. This means payers have received a healthy tax break that will suddenly disappear at the dawning of the New Year. There have been exceptions to the tax rule, since some couples in line for a divorce currently have the legal right to declare part or none of an alimony settlement to be tax deductible for the spouse paying maintenance costs.
The Changes You Need to Know by January 1, 2019
If you thought divorce was a sensitive issue before January 1, 2019, wait until the new amendment written into the IMDMA takes effect. On January 1, 2019, the spouse who pays alimony can no longer deduct maintenance costs on federal and Illinois tax forms. The recipient of spousal support does not have to declare alimony as taxable income. The loss of the tax break seems to negatively impact the spouse paying support costs, but both spouses will be hurt financially, especially if one spouse sits in a particularly high tax bracket. There will be less money to split in many divorces that receive court approval after December 31, 2018.
Although the legal guidelines for maintenance after January 1, 2019 have been modified by the Illinois legislature, any court handling a divorce case must consider the following factors to remain consistent with Section 504 on the Illinois Marriage and Dissolution Act, which we list verbatim according to what is written in the IMDMA.
(1) the income and property of each party, including marital property apportioned and non-marital property assigned to the party seeking maintenance as well as all financial obligations imposed on the parties as a result of the dissolution of marriage;
(2) the needs of each party;
(3) the realistic present and future earning capacity of each party;
(4) any impairment of the present and future earning capacity of the party seeking maintenance due to that party devoting time to domestic duties or having forgone or delayed education, training, employment, or career opportunities due to the marriage;
(5) any impairment of the realistic present or future earning capacity of the party against whom maintenance is sought;
(6) the time necessary to enable the party seeking maintenance to acquire appropriate education, training, and employment, and whether that party is able to support himself or herself through appropriate employment or any parental responsibility arrangements and its effect on the party seeking employment;
(7) the standard of living established during the marriage;
(8) the duration of the marriage;
(9) the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and the needs of each of the parties;
(10) all sources of public and private income including, without limitation, disability and retirement income;
(11) the tax consequences of the property division upon the respective economic circumstances of the parties;
(12) contributions and services by the party seeking maintenance to the education, training, career or career potential, or license of the other spouse;
(13) any valid agreement of the parties; and
(14) any other factor that the court expressly finds to be just and equitable.
What Do the 2019 Alimony Changes Mean for Married Couples?
The IRS code has also changed the way maintenance costs should be handled by both parties seeking dissolution of a marriage. Spouses paying alimony will no longer be able to deduct maintenance payments from gross income on federal tax forms, as well as on Illinois tax forms. The million dollar question for married couples trying to agree on an amiable split is whether the new state and federal tax changes will alter the way they look at divorce proceedings.
Since there is less money to split in a divorce, the changes written into Federal and Illinois tax laws will encourage both sides of a spousal dispute to fight harder to retain the same amount of money that was divided before January 1, 2019. Without a tax deduction, the spouse paying for financial support for the other spouse will want to give less money away in the form of maintenance. On the other hand, the spouse receiving alimony will want to wait until 2019 arrives to avoid claiming maintenance as part of his or her income. The new tax changes also place more pressure on judges to decide when to resolve divorce cases.
The dramatic and somewhat complicated changes made in handling alimony payments and compensation for tax purposes requires the legal expertise of an accomplished divorce lawyer. If it appears you are the spouse that will make maintenance payments, you definitely want to resolve your divorce case before January 1, 2019. On the other side of the legal coin, recipients of maintenance after December 31, 2018 will want to wait until the clock strikes midnight before trying to settle a divorce case.
If you have any questions. Please Contact us today to schedule a consultation to discuss your case.