The recently passed federal tax reform law will do away with the popular alimony tax deduction for all divorces that are completed after Dec. 31, 2018. According to the IRS, about 600,000 people claimed the deduction in their 2015 returns. Spousal maintenance agreements that are created before the end of the year will still be able to claim the deduction in the future. Thus, some couples feel that they are facing a deadline to complete their divorces before the new law goes into effect.

What Changes

With the current tax laws, the person paying spousal maintenance after a divorce can deduct the payments when filing his or her taxes. In turn, the spousal maintenance recipient must report the payments as taxable income. The new tax law makes spousal maintenance payments tax neutral in the same way that child support payments are. The payer will no longer claim the deduction, and the recipient will not pay taxes on it.

Under current Illinois law, judges have less discretion than they previously did in determining what, if anything, can be awarded for spousal support. Spousal maintenance or support awards in Illinois are calculated according to statutorily set guidelines.

Before deciding what amount should be awarded for spousal support, the judge is first required to determine whether spousal support is appropriate in a particular case by considering certain factors, including the following:

• The current property of each spouse;
• The realistic earning capacity of each spouse presently and in the future,
• Loss of earning capacity of both parties, including any loss of earning capacity based on a spouse taking on a more domestic role during the marriage, for example, loss of earning capacity for a stay-at-home parent;
• Standard of living of the spouses;
• Any valid agreements by the parties, such as a prenuptial agreement; and
• The time needed for the spouse receiving support to become self-sufficient.

Once the judge decides maintenance is appropriate, the maintenance award is calculated as follows for a couple earning less than $250,000 and having no previous child support or spousal support obligations. In order to determine the annual maintenance award, 20 percent of the income of the spouse who will receive the maintenance is subtracted from 30 percent of the income of the spouse who will pay the maintenance. The figure determined here is also restricted in that it cannot exceed 40 percent of the combined gross income of the couple.