Combined alimony and child support orders and after-tax income in Massachusetts divorce

Combined alimony and child support orders and after-tax income in Massachusetts divorce

 

The purpose of this blog post is to illustrate a series of alimony, child support, and after-tax income scenarios following the steps required by the MA State Judicial Court 2022 Cavanagh v. Cavanagh decision. I show the calculations results for families with incomes ranging from $50,000 to $250,000 per year.

 

You can calculate your own possible combined child support and alimony orders at this unique Cavanagh child support, alimony, and post-tax income calculator.

 

The Cavanagh decision upended established family court practice in which child support was calculated on the first $400,000 in family income (or the first $250,000 prior to 2021). Before Cavanagh, income that was used to calculate child support could not then be used to calculate alimony. This meant that divorcing couples with children (and less than $400,000 in family income) would have a child support order but no alimony order.

 

The Cavanagh decision ended the practice of limiting support orders for most families to child support only, and instead makes orders that include both alimony and child support a standard practice.

 

Cavanagh gave judges a specific set of calculations to consider in making alimony and child support orders. According to the Cavanagh decision, judges must do the following in making orders in contested (1B) cases where there might be child support:

 

  1. Calculate alimony first…..Then calculate child support using the parties’ post-alimony incomes.
  2. Calculate child support first. Then calculate alimony…[on family income above $400,000]
  3. Compare the base award and tax consequences of the order that would result from the calculations in step (1) with those of the order that would result from the calculations in step (2), above.

 

After making these calculations, “The judge should then determine which order would be the most equitable for the family before the court, considering the mandatory statutory factors set forth in G. L. c. 208, § 53 (a), and the public policy that children be supported as completely as possible by their parents’ resources, G. L. c. 208, § 28, and determine which order to issue accordingly.”

 

The Supreme Judicial Court decision means that judges should do two very different calculations and choose the one that is “most equitable for the family.” The decision fails to define what “equitable” might mean or to give any examples of orders that might be more or less equitable.

 

The Cavanagh decision requires judges to do more work and to defend their decisions if they do not issue orders that include alimony (such orders are always higher than child support alone): “Where the judge chooses to issue an order pursuant to the calculations in step (2) or otherwise that does not include any award of alimony, the judge must articulate why such an order is warranted in light of the statutory factors set forth in § 53 (a).”

 

This may encourage judges to routinely combine alimony with child support orders. If they do not include alimony in their orders, they must defend their decision in writing and subject themselves to more scrutiny from appeals courts. In other words, the path of least resistance for judges is to make orders that use the calculations from Step 1, which calculates alimony first and then calculates child support based on post-alimony income.

 

Scenario 1: Alimony and child support calculations with one spouse earning $50k per year and one spouse earning $0k per year

 

Calculation results for alimony and child support for lower income family
Click to enlarge

In this scenario, one spouse earns $50,000/year and the other spouse has no earnings. The spouse with no earnings (“$0k”) is the primary caregiver for the couple’s two children.

 

In the “Step 1”, or “alimony+child support” calculation, the higher earner pays $12,743 to the lower earner. The income of each is adjusted—the higher earner now has $12,743 less money per year and the lower earner has $12,743 more. These newly adjusted incomes are then used to calculate child support.

 

The higher earner (who has 1/3 or less of parenting time), pays the parent doing more childcare $11,284 per year. Finally, the approximate taxes are calculated—the higher income parent pays $10,216, while the lower earner gets $220 tax credit. Taxes are on gross income only. Alimony (since 2019) and child support play no role in taxes. The payor of alimony and child support does not receive any deduction for them, and the recipient of child support or alimony pays no taxes on the money received.

 

This alimony+child support calculation results in an approximate after-tax income of $15,728 for the higher earner and $24,247 for the lower earner, who has primary childcare responsibilities for two minor children.

 

In the “Step 2”, or “child-support-only”, calculation, only child support is paid, resulting in a payment of $15,236 to the parent who has the child 2/3 or more of the time. Taxes remain the same as in the alimony+child support calculation. The child-support-only calculation for this family reverses the income situation almost exactly: the higher earner has about $24,519 in after-tax income, while the lower earner, taking care of two children, has only $15,456.

 

In this scenario, alimony+child support would leave all family members living at or just above the federal poverty guideline levels. Child-support-only would leave the children and their caregiver well below federal poverty guidelines.

 

The difference for each party between alimony+child support and Child-support-only is about $9,000/year.

Scenario 2: Alimony and child support calculations with one spouse earning $100k per year and one spouse earning $0k per year

 

Cavanagh combined alimony, child support, and tax calculations for $100k and $0k in income
Click to enlarge

In this scenario, one spouse earns $100,000/year and the other spouse has no earnings. As in each of these scenarios, the spouse with lower earnings (“$0k” in this case) is the primary caregiver for the couple’s two children.

 

In this scenario, the difference between alimony+child support and child-support-only is more substantial. Child-support-only—which represents the way support was awarded up until the Cavanagh decision—gives the higher earner $44,134. This places the higher earner at the low end of middle-class status for Massachusetts. The parent taking care of the children, with $29,392 lives at just $5,000 above the federal poverty line.

 

Alimony+child support, in contrast, gives more income to the caregiver and children: $47,299. This puts them well above the poverty line ($24,860 for a family of three), but below middle-class status (about $70,000 for a household of 3). The higher earner ($29,392) lives $15,000 above the poverty line, but below middle-class status.

 

 

Scenario 3: Alimony and child support calculations with one spouse earning $100k per year and one spouse earning $50k per year

 

Calculation results for combined alimony child support and post-tax income per Cavanagh
Click to enlarge

As in Scenario 1, the difference between alimony+child support and child-support-only is only $9,000 for spouses.

 

In Scenario 2, in contrast, the difference between Steps 1 and 2 was $18,000. This is because Scenario 2 had a bigger difference in incomes, which affects both alimony and taxes. Alimony is calculated as a percentage of the difference between incomes, so a difference of $100,000 gives alimony that is twice as large as when the difference in incomes is only $50,000. In addition, income tax is progressive, so the $100k earner pays MORE than twice as much in taxes as the $50k earner.

 

In this example, alimony+child support puts the caregiver and children into the middle class and the high earner just below middle class. Child-support-only would put the high earner and low earner at the low end, or just below, middle class status.

Scenario 4: Alimony and child support calculations with one spouse earning $200k per year and one spouse earning $50k per year

Table showing Cavanagh calculations for child support, alimony, and post-tax income
Click to enlarge

 

With this high family income ($250k) and large difference between spouses in earnings ($200k), the difference between alimony+child support and child-support-only grows to $30,000. The high earner pays relatively high alimony, child support, and taxes. This results in approximate take-home income of $63,807 for the high earner despite the relatively high $200,000/year salary.

 

Both calculations leave both parties with middle class income. The alimony+child support makes the caregiver and children upper middle class, while the child-support-only calculation makes the high earner upper middle class and leaves the caregiver and children more precariously middle class.