BY: Christopher Griffiths
Two major pieces of legislation that affect maintenance and divorce have been enacted over the last year. First, the Tax Cuts and Jobs Act of 2017, and second, Colorado House Bill 18-1385. The new federal law changed the entire tax landscape and repealed the tax deduction for the spouse who pays maintenance. Several months later, House Bill 1385 was enacted to deal with the new changes on a state level. For family law practitioners, these changes will have enormous ramifications, the most important of which concern maintenance.
HOW MAINTENANCE IS CHANGING
For family law practitioners, the most critical set of changes to the new tax code concern the taxability of maintenance. Under the new law, 26 U.S. Code, sections 71 and 215 have been repealed, and maintenance is, therefore, no longer tax deductible to the spouse paying maintenance, effective for all divorces or separation instruments executed after Dec. 31.
What this means for most practitioners is an invitation into a legal quagmire. This is because net income will now be used instead of gross income to determine the amount of maintenance a spouse owes. While this might seem like a straightforward change, it has huge implications.