PA Supreme Court Amends The Support Guidelines To Reflect New Tax Treatment Of Alimony and APL

February 15, 2019

The Pennsylvania Supreme Court recently promulgated new rules for the calculation of spousal support, alimony, and APL (alimony pendente lite, i.e. alimony while litigation is pending). The federal tax laws that took effect on January 1, 2019 changed the way that alimony is treated for federal tax purposes. The federal law abolished the alimony deduction from a payor's gross income and the inclusion of alimony in a payee's gross income. In other words, alimony is no longer taxable federally for the payee and it is no longer deductible for the payor. The new rule applies to orders entered after January 1, 2019. The Pennsylvania support guidelines did not have a provision for this new rule and were still structured pursuant to the old federal tax rule.

However, on December 28, 2018, the Pennsylvania Supreme Court, which is responsible for promulgating rules of court for the Commonwealth, signed an order amending the support guidelines for Pennsylvania to address this change. The amended guidelines became effective on January 1, 2019 to coincide with the tax law. The guidelines now have two ways to calculate support, one for orders entered prior to the beginning of this year and one for orders entered after. For orders entered prior, the calculation will remain largely the same as it had been. For orders entered after January 1, 2019 and going forward, spousal support/APL is calculated differently. Rather than taking a percentage of the payor's net income, the new formula takes varying percentages of the respective parties' net income and subtracts them from each other. The percentages utilized depend on whether there is also child support at issue.

The consequence of the new form of calculation is that it essentially results in lower spousal support/APL orders and this is by design. This is designed to compensate the payor for not being able to deduct from his or her income payments pursuant to spousal support/APL orders under the new tax law because the actual amount paid will be lower. The payee has the disadvantage of not receiving as much support as he or she would have under the old rules, but then also gains the advantage of that amount no longer being included for tax purposes in his or her own income. The new guidelines have also altered the way that support is calculated in high income cases, colloquially referred to as Melzer cases after the case that spawned the analysis. However, that is for another blog on another day.

Suffice to say that spousal support and APL are now being treated differently by the IRS and the Commonwealth of Pennsylvania in the new year. You should consult with an experienced family law attorney to determine how these changes affect you and your situation. The lawyers at Conway Schadler have the experience and knowledge to counsel you in these areas and a lawyer that you can count on can make the difference in litigation.