In our previous posts, How the New Tax Law Affects Alimony in Pennsylvania: Part 1 and How the New Tax Law Affects Alimony in Pennsylvania: Part 2, we discussed how the new Pennsylvania spousal support guidelines that were enacted in response to the 2019 changes in the federal tax law affected child support, spousal support and alimony pendente lite awards. In this final post of the series, we will pick up where we left off and look at some of the other effects that the new law has on spousal and child support in divorce cases in Pennsylvania.
In our previous posts, we used an example of a couple earning $50,000 and $100,000 respectively and compared how child support, spousal support and alimony pendente lite awards changed under the new guidelines. With respect to combined spousal and child support, we determined that the total monthly payment from the custodial to the non-custodial parent would go from $1,627 under the old guidelines to $1,614 under the new guidelines.
While this may seem like an insignificant difference, is important to note that under the new guidelines, by calculating spousal support or alimony pendente lite prior to child support, the result is that the payor parent will have a lower net income and the payee parent will have a higher net income than they would have under the old guidelines. This will then change the parents’ percentage contributions to additional expenses such as the other parent’s medical insurance premium and unreimbursed medical expenses in excess of $250 per year and in cases involving children, the parents’ percentage contributions to child care expenses, children’s health insurance premiums, unreimbursed medical expenses, private school, summer camp, extracurricular activities and other “extra” expenses.
Let’s see how this plays out using our original example of one parent earning $50,000 per year and the other parent earning $100,000 per year. Just as in the original scenario, let’s also assume that these incomes net $3,333 and $5,833, respectively and a total combined monthly net income of $9,166. Under the old law, the higher-earning parent, who earns twice as much in this case, would be obligated to pay 64% of the health insurance premiums, 64% of the medical expenses in excess of $250 per year, 64% of the child care, educational, extracurricular and other “extra” expenses while the lower-earning parent would be obligated to pay 36% of these same expenses.
With the new formula, the lower earning spouse still nets $3,333 in income but now we have to include the $459 that we calculated as payment for spousal support or alimony pendente lite. The $459 is now added to the $3,333 giving the lower earning spouse a net monthly income of $3,792. The higher earning spouse nets $5,833 so the $459 support payment will similarly be subtracted from the $5,833, giving the higher earning spouse a net monthly income of $5,374. While the total combined monthly net income would remain $9,166, the parents’ respective proportional shares have now changed. Under the new law, the higher earning parent would be obligated to pay 59% of the health insurance premiums, 59% of the medical expenses in excess of $250 per year, 59% of the child care, educational, extracurricular and other “extra” expenses or while the lower earning parent would be obligated to pay 41% of these same expenses.
For example, let’s assume that the family’s monthly childcare, educational healthcare and “extra” expenses total $1,000 per month. Under the old law the higher earning parent would be responsible for $640 and the lower earning spouse would be responsible for $360. Now, under the new law, the higher earning spouse would be responsible for $590 and the lower income spouse would be responsible for $410. So, while the net difference in basic child support under the new tax laws are relatively modest, parents may feel a more significant shift in their contributions to additional such as child care, educational and medical expenses.
