Determining the amount and duration of maintenance — formerly known as alimony — requires an analysis of the financial resources of both parents, the standard of living the spouse would have enjoyed if the marriage had not ended, and each spouse’s actual gross income or potential income if unemployed or underemployed. Maintenance can be awarded on either a short-term or long-term basis. Permanent maintenance is increasingly rare, as courts tend to see maintenance as a form of temporary assistance that gives a spouse time to find a job or complete employment education or training.
In addition, the definition of “income” for purposes of calculating maintenance in Colorado is not the same definition of “income” used by the Internal Revenue Service. For example, other forms of compensation can be taken into consideration if significantly reduce personal living expenses, such as expense reimbursements received in the course of employment, the operation of a business, or self-employment.
When a divorcing spouse has an interest in a business, an income valuation by a CPA is usually required to help the court determine that spouse’s income when considering an award of maintenance—even though a business valuation is a complex process that lacks uniform methodology. Note that the income a business generates for a spouse may be limited to whatever actual cash distributions are received if the spouse does not have any managerial duties, is a passive investor, and has a minority interest in a company. Reasonable and justifiable business expenses can usually be deducted from gross income.
The new tax law has added another layer of complexity to maintenance awards. If you are ordered to pay maintenance on or after January 1, 2019, you are no longer allowed to deduct maintenance payments on your taxes and the maintenance payments are not taxable income to your former spouse. This is in spite of the fact that when Colorado child support is calculated, the spouse paying maintenance deducts those payments from income and the spouse receiving it must add those payments to income. The team at Halligan LLC can help you navigate these new rules and obtain a fair outcome.