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Q: Tax allowance for alimony payments in the US ( Answered 5 out of 5 stars,   6 Comments )
Question  
Subject: Tax allowance for alimony payments in the US
Category: Business and Money > Accounting
Asked by: pearlrivers-ga
List Price: $10.00
Posted: 14 Feb 2006 12:33 PST
Expires: 16 Mar 2006 12:33 PST
Question ID: 445756
My ex-husband works in the US for a company, he earns $190,000 p.a. If
he pays $56,000 alimony to his dependents, how much of that can he
claim against tax? In other words, could you please calculate the
amount of allowance on the 56k alimony that is allowed to him, then
the usual deductions taken out for medical insurance, general tax and
so on, then tell me roughly what his net tax before actually paying
the almimony would be. He told me - before he paid this amount - that
he had a take home pay of $126,000 from the $190,000. How much is he
allowed to claim back on the $56k? How much net income would he be
left with AFTER claiming for the almimony allowance, but before
actualy paying it. Ie I want to know his net annual income after his
deductions which include that of alimony allowance.

Clarification of Question by pearlrivers-ga on 14 Feb 2006 12:39 PST
Sorry, I've used the sterling sign in the second 56k reference - all
of this should be worked out in dollars, sorry. It's $56,000 he pays.

Clarification of Question by pearlrivers-ga on 15 Feb 2006 03:02 PST
Also how much in interest rates on mortgages is tax deductible? I have
heard that Americans borrowing for their houses can deduct all of the
interest from their groww income? ($2 50tip) Thank you!
Answer  
Subject: Re: Tax allowance for alimony payments in the US
Answered By: taxmama-ga on 21 Feb 2006 05:29 PST
Rated:5 out of 5 stars
 
Hi Jennifer, 

How awful about your illness. 

Considering that your ex asked you to forgo a career, he 
really ought not to be reducing your support at this stage.

Just some notes to help you do the calculations yourself - 
and to test various alternatives.

Linda's information about how support is computed by the 
divorce courts should be quite helpful to you. Hopefully,
your own attorney is familiar with the US rules and formulae? 
And can use either those or British laws - whichever work more
to your advantage.

1) For US tax purposes, alimony is deductible in full. 
Child support is not deductible at all. 

2) The US tax rates you need to know about are 
  a) Social Security/Medicare - 7.65% of wages up to about 94,200
After that, Medicare is deducted at 1.3% of all his wages.

  b) State taxes. I don't think you mention what state he's in. 
But you can find his state tax rates by clicking on the picture 
of his state, on this page:
http://www.taxadmin.org/fta/link/forms.html

3) Dependant deductions - $3,300 per child. 

Frankly, there's a phase-out in the tax deductions and credits
the higher his income goes.  So he might lose the benefit of 
the deductions for his children.

4) Mortgage interest - that will be deductible, less whatever part is
phased out due to his income level. Same thing with property taxes
and charitable contributions. 


5) Dependent care credits - you only get those if the children
are young. Typically under 13. 

6) Education deductions and credits? 
That's mostly for college. And his income is too high to qualify.

7) YOU can actually run all the numbers yourself and see the
net result at TurboTax's website.
http://turbotax.com/tax_tips_and_resources/?source=ttcommain

In the left-hand column, click on the tax estimator.

You can drop in the appropriate numbers and see what the results are.

Print out the final result. 

If you can't print them? Copy them down neatly by hand.

This should give you a starting point to help your case. 

Good luck!

Your TaxMama-ga
pearlrivers-ga rated this answer:5 out of 5 stars and gave an additional tip of: $5.00
Thank you so much - that's really kind of you, and much appreciated - all the best!

Comments  
Subject: Re: Tax allowance for alimony payments in the US
From: jhoppy-ga on 14 Feb 2006 14:12 PST
 
Your ex-husband is able to deduct all $56,000 of alimony payments from
his gross income, thus lowering the tax he is required to pay the
Federal government.  However, you mention alimony paid to his
'dependents.'  According to IRS Publication 504, a person can only
deduct alimony if it is paid to a spouse or ex-spouse persuant to a
divorce or seperation instrument (such as a written agreement or
decree).  I'm not sure what you mean by 'dependents' but if any of the
money is for child support, that portion is NOT deductable.  If he
were to deduct all $56,000 (with no other deductions) his tax due
would decrease from $49,699 to $32,027.  Keep in mind that (if you are
in the US) you need to claim the $56,000 in alimony you received as
income for tax purposes.
Subject: Re: Tax allowance for alimony payments in the US
From: pearlrivers-ga on 15 Feb 2006 02:52 PST
 
Hello jhoppy and thank you for this so far. I think I should explain a
bit more then and say what I want it for, so what I actually need. My
ex is English and went to work in the States 10 years ago, leaving me
and our two then v young children - he asked me not to work but to
look after them full time. I have now become seriously and incurably
ill - just after he had the alimony put down in 04 - and I can't work
much and can't manage financially, though he does very well. So I need
to go back to court to say what his actual take home pay is so they
can calculate child support from that figure. I suspect he is not
telling the truth when he says his gross is $190,000 and net is
$125,000 because he let slip once that if he pays the school fees, he
can deduct that out of tax as well as deducting the support he gives
me and our two sons. He pays directly to the school 14,000 sterling
pa for fees and 500 a month sterling to each boy and myself (ie 1500
a month, 18,000) a year. That makes 32,000 (sterling) being paid out
for his ex wife/kids/one set of school fees from his wages of $190,000
(dollars) gross. How much can he have as tax deductible from that and
how much does has have left as his take home pay? I'm not sure how to
do it otherwise: the Chuild Support Agency calculate the amount a man
should give his children on his net pay per week - so it is all a bit
rough. I just need to show something simple that says what his take
home pay is likely to be with these payments made. Would a tip of $7
50 be appropriate for this extra work? I look forward to hearing from
you and good luck. Yes do quite a relevant publication as it all looks
good - Pearl
Subject: Re: Tax allowance for alimony payments in the US
From: jhoppy-ga on 15 Feb 2006 12:20 PST
 
Are you trying to go through the US courts or the UK courts?  I don't
know much about UK family law, but, usually in the US, child support
is based on the take home pay of each parent added together.  A total
support amount is arrived at (for food, housing, clothing, etc.) and
each parent is responsible for a percent of the support amount equal
to the percent of total take home pay their income represents.  This
is usually based on the parents paycheck, not their tax return, though
that may be used as well, I'm not sure.  Usually extra costs for
insurance, day care, and schooling are seperate and each parent pays
their percentage of those costs as well.  Money for child support is
never deductable on one's Federal income tax return.  Was the divorce
finalized in the UK or the US?  For US tax purposes, a non-custodial
parent (the one who does not have full custody of the kids) can only
claim certain expenses for a dependent (such as child care costs,
child tax credit, education expenses) if a divorce decree says you
(the custodial parent) give up the right to claim the children as your
dependents, or you complete a special IRS form giving up this right to
him.  Also, he makes more money then the upper limit for deducting
education expenses.  I suggest you try and base your support on his
paycheck.  The Child Support Agency you are working with should be
able to help you determine what information you need from him.  If you
go through the US courts, you will both probably need to show
documentation supporting the income you claim to have (such as
paychecks, tax returns, bank statements).  Sorry I can't offer more
specific help.  I am not an international attorney.  I am also not a
researcher so your offer of a tip (while very nice) is not necessary. 
I'm just a bored person at work who has spent many a night researching
the tax implications of my fiances ex-wife and children.
P.S. Where abouts in the UK do you live?  I spent 4 years in Scotland
and a year in London.  I love the UK! and wish I was there right now!
Subject: Re: Tax allowance for alimony payments in the US
From: pearlrivers-ga on 16 Feb 2006 03:09 PST
 
Thank you so much for that - it is very kind of you and I appreciate
it. It's all being done in the UK, just going back to court (yuk) as
don't want to get involved with dreaded CSA, but do look after kids
full time since he defected and they have learning difficulties and I
have now become seriously (and, alas, incurably)ill. He took me to
court and wiped the floor with me just as was getting ill but
undiagnosed - so now will have to rectify, if poss. He did not give
'full and frank' disclosure in court, sorry to say, but it is peculiar
that he did once tell me that he got a tax allowance on his alimony
payments and that - if he added the school fees to it - he could pass
that under the wire as well. I was trying to get some info to tell the
court what his tax bill as he seems to be employed but pay tax as if
self employed...

We are in Brighton, which is nicer than London. What do you do for a
living that bores you? Whereabouts in US are you? - Pearl
Subject: Re: Tax allowance for alimony payments in the US
From: jhoppy-ga on 16 Feb 2006 14:45 PST
 
I'm in Colorado and work in import/export for a computer company. 
It's not that I find my job boring, in fact, I love it!  I have just
had a couple of slow, boring days.  I'm sorry to hear about your
troubles and I hope the money situation and your health all improve
for you.  Take Care!

Jennifer
Subject: Re: Tax allowance for alimony payments in the US
From: pearlrivers-ga on 17 Feb 2006 01:24 PST
 
Thank you and thanks for your help,Linda

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