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.
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