What Happens to Unallocated Maintenance in an Illinois Divorce Modification? 

 Posted on February 03, 2022 in Divorce

Spousal maintenance, also known as alimony or spousal support, is an essential part of many Illinois divorce decrees. When married spouses shared a standard of living, especially when a spouse forewent career opportunities to provide a family’s childcare and housekeeping, one spouse will frequently have to pay the other spousal maintenance. 

As with child support, spousal maintenance payments are generally determined by state guidelines that depend on both spouses’ income. Some situations, however, allow judges more leeway in terms of how much payments will be and how they will be allocated. Before 2019, there was one particular type of maintenance available: Unallocated maintenance. While unallocated maintenance is no longer granted in divorces, some people in Illinois are still making or receiving unallocated maintenance and may wonder if the change in the law has implications for them. 

What is Unallocated Maintenance in Illinois? 

The Tax Cuts and Jobs Act (TCJA) changed federal laws about claiming spousal support as tax-deductible income. Prior to the TCJA, the spouse who paid spousal support could deduct the year’s payments from their taxable income; the spouse receiving payments would pay income tax on them. 

Because child support is tax neutral (it cannot be deducted by the payor and is not taxed as income by the recipient), sometimes child support and spousal support payments could be combined into “unallocated maintenance” to a single maintenance payment that was tax-deductible for the paying spouse. Both the recipient spouse and the paying spouse could benefit from this arrangement, especially when the paying spouse made significantly more than the receiving spouse. 

Will I Lose Unallocated Maintenance if I Modify the Maintenance Award? 

When the TCJA was enacted, spouses who got divorced on January 1, 2019 or thereafter could no longer get unallocated maintenance because spousal maintenance is now tax neutral. The paying spouse pays taxes on the maintenance award, and the receiving spouse does not. Spouses who are already paying or receiving unallocated maintenance must continue doing so unless they petition an Illinois court to modify their divorce decree. 

If either spouse does successfully petition for a modification to their spousal maintenance order or the maintenance order is scheduled for a review, as is often mandated periodically in a divorce decree, the new award will not include unallocated maintenance. This will likely require a modification of child support payments as well. An Illinois attorney with experience in spousal maintenance could be helpful to spouses who need to understand the tax implications of modifying maintenance. 

Call a DuPage County Unallocated Maintenance Lawyer

If you are hoping to modify your spousal maintenance order and deal with the issue of unallocated maintenance, consider speaking to an experienced Wheaton, IL unallocated maintenance attorney first. The skilled and knowledgeable lawyers with The Stogsdill Law Firm, P.C. can help review your petition and help you plan for potential outcomes in your case. Call us today at 630-462-9500 to schedule an initial consultation. 

Source: 

https://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=075000050HPt%2E+V&ActID=2086&ChapterID=59&SeqStart=6200000&SeqEnd=8675000