Decades-Old Maintenance Deduction Eliminated By New Tax Law
Late last year, President Trump signed the GOP's tax bill into law. While it has been lauded in some circles as a welcome tax break for American workers and businesses, changes to the tax code will make getting divorced more expensive for maintenance payors by removing a deduction in place since 1942.
Beginning on January 1, 2019, former spouses that pay maintenance will not be able to deduct the payments from their taxes. This change only applies to orders or settlements signed after January 1, 2019.
Under the new tax law, not only will maintenance payors be unable to deduct the payments from their taxes, payees will not have to report the money as income. This will change the calculations under Illinois's new maintenance statute, which are based on the gross incomes of both spouses.
Prior to the GOP tax bill, the maintenance payment was considered part of the payee's gross income. Under the new tax law, the recipient spouse is not taxed on those funds. That means they are not calculated as part of the payee's reportable gross income. This will often result in the payor spouse paying more in both taxes and support - the latter because the payee's gross income will decrease under the new tax law.