Should I pay Alimony through the court? for taxes? CA

[justsomeguy]

What is the name of your state (only U.S. law)? California.

so I just got divorced and my wife and I have agreed to handle all the financial stuff between us. We have a child (stays mostly with her mom) and I will do my best to take care of them, I'm more concerned with peace than money. That being said I don't make much 45K she doesn't work. (school)

I know if I pay her Alimony then she has to claim it and I can deduct it from my taxes. That would put her at about 12K for the year, and me at about 33K for the year (she's getting a bunch of other stuff) but anyway. I'm thinking at 12K she would owe nothing in taxes and at 33K I would probably owe much less in taxes than I owe at 45K, so maybe I should make it official?

Is my thinking correct on that? Would I be able to designate it as alimony vs. child support?

Thanks for any advice.

 

[single317dad]

While I don't disagree with the idea of "making it official" and getting the alimony ordered through the court, I can think of a scenario where you might regret that decision. If there ever comes a time when you are unable to pay the alimony payments, the court has more powerful remedies available to enforce its order than your wife would have if the agreement was directly between you and her. It's a much shorter path from an alimony order to a jail cell for civil contempt than it is from a written agreement to that same cell (though you can still get there either way, eventually).

 

[Pinkie39]

While I don't disagree with the idea of "making it official" and getting the alimony ordered through the court, I can think of a scenario where you might regret that decision. If there ever comes a time when you are unable to pay the alimony payments, the court has more powerful remedies available to enforce its order than your wife would have if the agreement was directly between you and her. It's a much shorter path from an alimony order to a jail cell for civil contempt than it is from a written agreement to that same cell (though you can still get there either way, eventually).

And I would think she could also file for child support on top of the alimony, if she so chooses. If it were me, I wouldn't run that risk with the alimony, unless the court ordered it.

 

[stealth2]

What is the name of your state (only U.S. law)? California.

so I just got divorced and my wife and I have agreed to handle all the financial stuff between us. We have a child (stays mostly with her mom) and I will do my best to take care of them, I'm more concerned with peace than money. That being said I don't make much 45K she doesn't work. (school)

I know if I pay her Alimony then she has to claim it and I can deduct it from my taxes. That would put her at about 12K for the year, and me at about 33K for the year (she's getting a bunch of other stuff) but anyway. I'm thinking at 12K she would owe nothing in taxes and at 33K I would probably owe much less in taxes than I owe at 45K, so maybe I should make it official?

Is my thinking correct on that? Would I be able to designate it as alimony vs. child support?

Thanks for any advice.

Alimony and child support are two different animals. What were you ordered to pay? You can't pretend that the CS you are ordered to pay is alimony - it's not. Nor can she pretend that the alimony you pay is child support.

So - what are you ACTUALLY ordered to pay?

 

[justsomeguy]

I was not ordered to pay anything they wrote the divorce papers up as finances will be mutually agreed-upon by both parties. There is no requirements by the court for child support or alimony. We were both told that if she ever decides to ask for more and I don't want to pay her or I don't pay her then of course she could file a petition and forced me to pay her. I have no intention of her ever having to do that though. Luckily we get along very well now and I'm doing my best to make sure that her and my daughter are taken care of, however in the end it's all the money I have (and I am totally okay with that) so I'm just looking for ways to make the most of it for both of us.

 

[LdiJ]

I was not ordered to pay anything they wrote the divorce papers up as finances will be mutually agreed-upon by both parties. There is no requirements by the court for child support or alimony. We were both told that if she ever decides to ask for more and I don't want to pay her or I don't pay her then of course she could file a petition and forced me to pay her. I have no intention of her ever having to do that though. Luckily we get along very well now and I'm doing my best to make sure that her and my daughter are taken care of, however in the end it's all the money I have (and I am totally okay with that) so I'm just looking for ways to make the most of it for both of us.

Bottom line, no court ordered alimony, no tax deduction.

 

[justsomeguy]

Bottom line, no court ordered alimony, no tax deduction.

Correct, that is why I asked the question. That is the point of this thread, would it be worth me having it court ordered (cuz it's not now) for tax reasons? I was hoping someone might have experience with this.

 

[tranquility]

Correct, that is why I asked the question. That is the point of this thread, would it be worth me having it court ordered (cuz it's not now) for tax reasons? I was hoping someone might have experience with this.

It's taken right off the top. It's not really a "deduction" so much as something used to reduce your total income to reach your adjusted gross income. As to if it is "worth" it is not really a legal question.

 

[LdiJ]

It's taken right off the top. It's not really a "deduction" so much as something used to reduce your total income to reach your adjusted gross income. As to if it is "worth" it is not really a legal question.

I agree. Its all going to depend on how much a court order would define as alimony, vs child support. You cannot deduct child support, only alimony. Its also subjective.

As an example:

If you are in the 15% marginal tax bracket then if you pay her 400.00 a month in alimony, that is going to be 4800.00 per year, therefore your taxes would reduce by $720.00. If you are in the 25% marginal tax bracket then your taxes will reduce by $1200.00.

 

[tuffbrk]

Once alimony is court ordered it's nearly impossible to adjust it. The risk, in my honest opinion, is not worth the tax savings. Keep in mind that Child support ends. Alimony may end depending upon the length of your marriage but it's not guaranteed to end if you have a fairly long term marriage.

In addition, there has been some chatter this past year about taking away the tax deduction for alimony payers and giving the tax deduction to the recipients instead - see here -->> http://taxfoundation.org/blog/alimony-deduction-and-camp-proposal

I've seen numerous blog articles about the advantage of paying alimony over child support. This is meant for the 1%, not low to middle income earners.

 

[LdiJ]

Once alimony is court ordered it's nearly impossible to adjust it. The risk, in my honest opinion, is not worth the tax savings. Keep in mind that Child support ends. Alimony may end depending upon the length of your marriage but it's not guaranteed to end if you have a fairly long term marriage.

In addition, there has been some chatter this past year about taking away the tax deduction for alimony payers and giving the tax deduction to the recipients instead - see here -->> http://taxfoundation.org/blog/alimony-deduction-and-camp-proposal

I've seen numerous blog articles about the advantage of paying alimony over child support. This is meant for the 1%, not low to middle income earners.

You have that slightly wrong. The idea is to treat it like child support. It won't be a deduction for the recipient, it just wouldn't be included in income. I think its highly unlikely that that will ever happen, because it doesn't make sense and its very long established law. This isn't one of those temporary tax treatments to stir economic growth, its been established for decades and is ultimately fair.

On top of that, in the 1% cases the levels are high enough that the recipient is generally paying a decent amount of tax anyway...therefore its not going to gain the government coffers any really significant amount of additional tax.

 

[tranquility]

You have that slightly wrong. The idea is to treat it like child support. It won't be a deduction for the recipient, it just wouldn't be included in income. I think its highly unlikely that that will ever happen, because it doesn't make sense and its very long established law. This isn't one of those temporary tax treatments to stir economic growth, its been established for decades and is ultimately fair.

On top of that, in the 1% cases the levels are high enough that the recipient is generally paying a decent amount of tax anyway...therefore its not going to gain the government coffers any really significant amount of additional tax.

I think it does rather make sense as the income earned will be taxed at the earner's rate rather than the one who eventually gets it. It would raise revenues and could be argued to be more "fair". While I don't know the earner's *rate* is higher, I suspect in most cases it is. Certainly the income levels are higher which would reduce deductions and might cause other tax negative issues. (Passive losses, amount that can be contributed to IRA, etc.)

 

[LdiJ]

I think it does rather make sense as the income earned will be taxed at the earner's rate rather than the one who eventually gets it. It would raise revenues and could be argued to be more "fair". While I don't know the earner's *rate* is higher, I suspect in most cases it is. Certainly the income levels are higher which would reduce deductions and might cause other tax negative issues. (Passive losses, amount that can be contributed to IRA, etc.)

We will have to agree to disagree on this one then. I view alimony as a clear transfer of income...and so has the government for decades. I don't feel the same way about child support because everyone supports their children with after tax income.

 

[Bali Hai]

Once alimony is court ordered it's nearly impossible to adjust it. The risk, in my honest opinion, is not worth the tax savings. Keep in mind that Child support ends. Alimony may end depending upon the length of your marriage but it's not guaranteed to end if you have a fairly long term marriage.

In addition, there has been some chatter this past year about taking away the tax deduction for alimony payers and giving the tax deduction to the recipients instead - see here -->> http://taxfoundation.org/blog/alimony-deduction-and-camp-proposal

I've seen numerous blog articles about the advantage of paying alimony over child support. This is meant for the 1%, not low to middle income earners.

Reaganomics is still alive and well I see. The "trickle down theory". Give tax breaks to the 1 percent (billions upon billions) and it will stimulate growth and jobs. Well we've seen the DOWN, but are still waiting for the TRICKLE since the jackass took office 30 years ago..

 

[Just Blue]

Reaganomics is still alive and well I see. The "trickle down theory". Give tax breaks to the 1 percent (billions upon billions) and it will stimulate growth and jobs. Well we've seen the DOWN, but are still waiting for the TRICKLE since the jackass took office 30 years ago..

Goodness Bali!! And here I thought you were a stout Republican!