For the past several decades the “alimony deduction” has been available to all divorcing couples. This deduction provided that the spouse making alimony payments could deduct alimony payments from his or her income and the person receiving alimony would claim these payments as taxable income. However, under the Tax Cuts and Jobs Act of 2017, all support orders entered after January 1, 2019 will no longer qualify for this deduction.
In response to the new tax reality, the Pennsylvania Supreme Court has provided new guidelines under which to calculate support. Under these new guidelines, there are two methods of calculating support, one for orders entered before December 31, 2018 and one for orders entered after January 1, 2019.
Guidelines for Orders Entered Before December 31, 2018
If a support order was entered before December 31, 2018, the old guideline calculation applies. Under this calculation, spousal support/APL is calculated by taking 30 percent of the difference of the parties’ net incomes minus child support, or, if there is no child support order, 40 percent of the difference of the parties’ net incomes. The spousal support/APL figure is calculated after calculating child support.
Guidelines for Orders Entered After January 1, 2019
If a support order was entered after January 1, 2019, the new guidelines apply. The new guidelines take the percentage of the incomes of the payor and payee and subtract them from each other. Specifically, in support cases where there is no child support order, 40 percent of the payees’ net income is subtracted from 33 percent of the payor’s net income. In cases where child support is calculated, 30 percent of the payee’s net income is subtracted from 25 percent of the payor’s net income, and then the result is subtracted from the payor’s net income and added to the payee’s net income in calculating child support.
Importantly, the new guidelines calculate spousal support/APL before calculating child support. As a result, the payor’s net income is reduced and the payee’s net income is increased in the child support calculation. This changes the percentage contribution to extra expenses such as extracurricular activities, child care, private school and medical expenses.
For example, under the old guidelines, if “Parent A” earns a net of $3,000 per month, and “Parent B” earns $1,000 per month, “Parent A” would be responsible for 75% of extra expenses and “Parent B” would be responsible for 25% of extra expenses. However, under the new guidelines, spousal support/APL payments are calculated before determining the parties net monthly income. Therefore, if “Parent A” pays $500 per month in spousal support/APL, when calculating child support, “Parent A” will have a net income of $2,500 per month and “Parent B” will have a net income of $1,500 per month. This shifts the percentage contribution to 63% and 37% respectively. This percentage shift is likely to have a significant impact on parents who contribute towards costly expenses such as private school, child care, and medical premiums.