How the New Tax Law Affects Alimony in Pennsylvania: Part 2

In our previous post, How the New Tax Laws Affect Alimony in Pennsylvania: Part 1, we discussed the new Pennsylvania spousal support rules that were enacted in response to the 2019 changes in the federal tax law and how those changes affected spousal support and alimony pendente lite. In this post, we will dive deeper into some more complicated support scenarios involving dependent children and see how the changes to the spousal support rules affect these situations.

In our first blog, we used a basic example where one spouse earned $100,000 per year and the other spouse earned $50,000.  In that example, we saw that under the new spousal support rules the alimony payment from the payor spouse to the payee spouse decreased from $1,000 per month under the old rules to $592 under the new rules.

Let’s start with the same facts but add child support to the scenario: one parent earns $50,000 per year and the other parent earns $100,000 per year and now there are two dependent children to support. Just as in the original scenario, let’s also assume that the lower earning parent nets $40,000 per year and the higher income parent nets $70,000 per year. That leaves a monthly net of $3,333 and $5,833, respectively and a total combined monthly net income of $9,166.
Under the old guidelines, we would calculate child support before calculating spousal support or alimony pendente lite. Based on these facts, the total child support for two children would be $1,958 per month according to the child support guidelines schedule (which calculates child support based on a combination of the number of children and the parents combined net monthly income). Each parent would then be responsible for a share of that amount based on that parent’s proportional share of the total combined monthly net income. In this scenario, the higher earning parent would be responsible for 64% of the total child support amount ($1,958) and the lower earning parent would be responsible for 36%. Assuming for now that the higher earning spouse is the non-custodial parent, the total child support paid from the non-custodial parent to the custodial parent would be approximately $1,253.

Then, we would calculate spousal support or alimony pendente lite under the old formula by taking the difference between the monthly net incomes of the spouses ($2,500 which equals the difference between $3,333 and $5,833) and then subtracting the child support paid ($1,253) which then equals $1,247. Under the old guidelines, we would then take 30% of $1,247 to get a spousal support or alimony pendente lite payment of $374. So the total monthly payment from the custodial to the non-custodial parent would be $1,627.

Now under the new guidelines, we would calculate the spousal support or alimony pendente lite before child support. To calculate spousal support or alimony pendente lite under the new guidelines, we would take 25% of the higher earning spouse’s net monthly income and 30% of the lower earning spouse’s net monthly income. This comes out to $1,459 for the higher earning spouse and $1,000 for the lower earning spouse. The difference between these numbers, or $459 would be the spousal support or alimony pendente lite.

In order to determine child support, we would then add the monthly spousal support or alimony pendente lite payment to the lower earning spouse’s monthly income and subtract it from the higher earning spouse’s monthly income. The adjusted monthly net income now becomes $3,792 for the lower earning spouse and $5,374 for the higher earning spouse. The parties’ combined monthly income remains $9,166 and the total child support amount remains $1,958. However, now, factoring in spousal support or alimony pendente lite the higher earning spouse would now be responsible for 59% of the total child support and the lower income spouse would be responsible for 41%. Again assuming that the higher earning spouse is the non-custodial parent, the total child support paid from the non-custodial parent to the custodial parent would be approximately $1,155. So the total monthly payment from the custodial to the non-custodial parent would be $1,614.

While this may seem like a modest difference, under the new guidelines, by calculating spousal support or alimony pendente lite first, the payor parent will have a lower net income and the payee parent will have a higher net income which will change the percentage contribution to extra expenses such as medical insurance premiums and unreimbursed medical expenses. We will see how this plays out in our next post, “How the 2019 Tax Laws Affect Alimony: Part 3.”

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