A significant change in the state’s maintenance law came into effect on January 1, 2019. The most significant revision to Illinois’ maintenance law came in the form of modifying how maintenance is calculated by the courts. Prior to January 1, 2019, maintenance was calculated by subtracting 20% of the payee’s gross income from 30% of the payor’s gross income. The maintenance law also provided for a 40% maintenance “cap”. Specifically, the payee’s combined income from their regular income and maintenance could not exceed 40% of the parties combined gross income. The aforementioned calculation has now changed.
All maintenance put into effect by the courts after January 1, 2018, now calculates maintenance using net income instead of gross income. Specifically, maintenance is calculated by subtracting 25% of the payee’s net income from 33.33% of the payor’s net income. The 40% “cap” rule was modified to make it 40% of the parties’ combined net income instead of 40% of the parties’ combined gross income. The new maintenance law also gives the court the ability to order non-guideline maintenance when a combined maintenance and child support obligation would exceed 50% of the payor’s net income. Competent legal representation will be needed for clients to ensure that the opposing party does not misrepresent a payor’s “net” income in an attempt to either mitigate the maintenance they will be paying or trump up the maintenance payment they would be receiving. The attorneys at Allison & Mosby-Scott anticipate the new maintenance law will lead to extensive litigation involving determining what litigants “net” income truly is under the new maintenance law.
The new maintenance law also has tax consequences. Due to the Tax Cuts and Job Act (TCJA), the deductibility of maintenance has changed. Prior to January 1, 2019, maintenance was deductible for the payor and was income for the payee. After January 1, 2019, new maintenance orders, or those modified after January 1, 2019 which specifically say that the new law will apply, maintenance is no longer deductible for the payor and is not income for the payee. A payor who had a Judgment for Dissolution entered prior to January 1, 2019, can still deduct their maintenance payments. The courts will still use the previous maintenance calculation for parties who are seeking to modify maintenance that was court ordered prior to January 1, 2019. A more detailed discussion of the TCJA can be found here.
The January 1, 2019, change to 750 ILCS 5/504(b-1) is as follows:
(b-1) Amount and duration of maintenance. Unless the court finds that a maintenance award is appropriate, it shall bar maintenance as to the party seeking maintenance regardless of the length of the marriage at the time the action was commenced. Only if the court finds that a maintenance award is appropriate, the court shall order guideline maintenance in accordance with paragraph (1) or non-guideline maintenance in accordance with paragraph (2) of this subsection (b-1). If the application of guideline maintenance results in a combined maintenance and child support obligation that exceeds 50% of the payor’s net income, the court may determine non-guideline maintenance in accordance with paragraph (2) of this subsection (b-1), non-guideline child support in accordance with paragraph (3.4) of subsection (a) of Section 505, or both.
(1) Maintenance award in accordance with guidelines.If the combined gross annual income of the parties is less than $500,000 and the payor has no obligation to pay child support or maintenance or both from a prior relationship, maintenance payable after the date the parties’ marriage is dissolved shall be in accordance with subparagraphs (A) and (B) of this paragraph (1), unless the court makes a finding that the application of the guidelines would be inappropriate.
(A) The amount of maintenance under this paragraph (1) shall be calculated by taking 33 1/3% of the payor’s net annual income minus 25% of the payee’s net annual income. The amount calculated as maintenance, however, when added to the net income of the payee, shall not result in the payee receiving an amount that is in excess of 40% of the combined net income of the parties.
(A-1) Modification of maintenance orders entered before January 1, 2019 that are and continue to be eligible for inclusion in the gross income of the payee for federal income tax purposes and deductible by the payor shall be calculated by taking 30% of the payor’s gross annual income minus 20% of the payee’s gross annual income, unless both parties expressly provide otherwise in the modification order. The amount calculated as maintenance, however, when added to the gross income of the payee, may not result in the payee receiving an amount that is in excess of 40% of the combined gross income of the parties.