DuPage County Unallocated Maintenance Attorneys
Unallocated Alimony Lawyers Serving Bloomingdale, Lombard, and Naperville
NOTE: As of January 1, 2019, unallocated maintenance is no longer available in divorce cases. For divorces finalized prior to that date, unallocated maintenance agreements will remain in effect, and maintenance and/or child support payments will continue to be taxed as they had been previously. However, if either party experiences a significant change in circumstances that requires a post-divorce modification, any adjustments to maintenance may result in maintenance payments being taxable for the payor rather than the payee. By consulting with an experienced DuPage County divorce attorney before making modifications to your divorce decree, you can ensure that your financial interests will be protected in any decisions made.
Most spouses going through a divorce are familiar with child support and alimony/maintenance. Child support is designated for the needs of the children and maintenance for the needs of the receiving spouse. In Illinois divorces finalized prior to December 31, 2018, another option was available, known as unallocated maintenance, that could often be financially beneficial for both parties. Unallocated family support is only beneficial in certain cases, however. For this reason, it should only be implemented with the advice and counsel of an experienced divorce and family law attorney.
At Mevorah Law Offices LLC, we have been serving clients in the Chicago area and throughout Illinois for over 40 years. Our award-winning attorneys have extensive experience with even the most complex divorces involving debt division, bankruptcies, and other challenging financial issues. Our lawyers are skilled, approachable and dedicated to protecting the interests of each client we serve. In addition, we have in-depth knowledge of tax consequences and divorce.
Unallocated Maintenance and Taxes
During a divorce, child support is typically tax neutral; in other words, child support payments cannot be deducted by the paying spouse and are not taxed as income to the receiving spouse. For divorces finalized prior to 2019, Alimony/maintenance was tax deductible for the paying spouse and was subject to income taxes for the receiving spouse. In some of these cases, unallocated maintenance was used to combine child support and alimony payments into one award that was tax deductible for the payor and taxable income for the recipient. This arrangement provided benefits for both the payor and the recipient.
Unallocated maintenance was used to benefit both parties in instances when there was a wide disparity in income between the spouses. For example, if the paying spouse was in one of the higher tax brackets, and the receiving spouse was in the lowest tax bracket or was a stay at home parent, unallocated family support could allow the paying spouse to save money by moving into a lower tax bracket even while paying a significantly higher award. At the same time, the receiving spouse was taxed at a higher income level but was still better off, because they received a larger award than they would have otherwise.
Changes to Tax Laws
The Tax Cuts and Jobs Act of 2017 redefined how maintenance is taxed. For divorces finalized after December 31, 2018, maintenance is treated the same as child support, meaning that it is not tax-deductible for the payor or taxable for the recipient. Unallocated maintenance is no longer available under the new tax law. However, unallocated maintenance agreements implemented in divorces finalized before January 1, 2019 will remain in effect.
Mevorah Law Offices LLC has helped numerous address tax issues during divorce. Our skilled attorneys are honest and down to earth, and we work closely with our clients to develop practical and creative solutions to help make the best of a very difficult situation. We are also very accessible to our clients and offer extended evening and weekend hours to help accommodate busy schedules. Contact our office today at 630-932-9100630-932-9100 for a free consultation.