What Happens to Unallocated Maintenance if I Modify My Divorce Decree?
Before January 1, 2019, divorcing spouses in Illinois could sometimes receive something known as “unallocated maintenance.” While most people are familiar with child support and spousal support (also known as alimony or spousal maintenance), unallocated maintenance was less common. Until the law changed, unallocated maintenance allowed spouses to receive money that could be used for both children and themselves, with certain tax implications.
Recent federal tax laws removing unallocated maintenance as an option may have consequences for individuals receiving unallocated maintenance who want to modify their divorce decree. If you are receiving unallocated maintenance and want to learn more, read on.
Tax Implications of Unallocated Maintenance
Child support payments in Illinois are “tax neutral” - the spouse who makes payments cannot deduct them from their taxes, and the parent who receives payments does not pay income taxes on them. But before 2019, spousal support was tax-deductible and the receiving spouse had to pay income tax. Sometimes, unallocated maintenance was used as an option for combining spousal and child support when one spouse made significantly higher income than the other, simplifying matters and providing tax benefits for the receiving and the paying spouse.
Federal Tax Law Changes
In 2017, the federal Tax Cuts and Jobs Act changed how spousal support is taxed. Starting on January 1, 2019, spousal support is handled the same as child support for tax purposes and unallocated maintenance is no longer available in new divorce cases. For spouses who were already receiving unallocated maintenance, the payments would continue unless either spouse successfully petitioned to modify the divorce decree.
Modifying spousal and child support can only be done when a spouse has experienced a substantial change in circumstances. Job loss, disability, and other significant issues may be grounds for modifying a divorce decree. However, it is important for divorced spouses to be aware that any modifications will be subject to the new tax laws, potentially having a major impact on how much money a spouse pays or receives.
Call a Batavia, IL Spousal Maintenance Modification Attorney
Getting your divorce decree modified can be a complex legal process, but it may be easier with the help of an experienced Kane County divorce decree modification lawyer with the Law Office of Van A. Larson, P.C. We advocate passionately for our clients and offer free case reviews to help you understand your legal options. Call us today at 630-879-9090 to schedule a consultation by phone or by video chat.