Tax Tip of the Week
900 N. Kings Highway, Cherry Hill, New Jersey 08034
856.667.4100 ·
215.563.0276 ·
Fax: 856.667.3652
Avoid salt in the tax wound
For the week of
December 18, 2000
It can be financially painful to pay huge long-term payments
to an ex-spouse. It is even more painful to do so with after-tax dollars. If you are in the 39.6% tax bracket,
you must earn $1,656 to provide a $1,000 after-tax payment to your ex-spouse.
How does one get around this and save himself or herself the extra $656 per thousand?
Payments treated as alimony are deductible by the payer and taxable to the recipient. Child support, on the other
hand, is not deductible by the payer nor taxable to the recipient.
To be treated as alimony, the payments must meet six requirements:
- The payment must not be a property settlement.
- The payment must not be for child support. If payments are reduced when a child reaches a certain age, the payments will be considered to be child support.
- Payment must be made under a decree of divorce, separation, or support.
- Divorced or legally separated couples must live in different households.
- The payer's obligation must end on the death of the recipient.
- Payments must be in cash or its equivalent.
If you have questions or if we can be of assistance, please
contact us. You do not need to be a client of our firm to call us. We are here to help you.
Click here to view previous tax tips.
"Tax Tips" are published weekly to
provide useful tax information. Return to this site every week for helpful tax-cutting suggestions, tax reminders,
and current tax information.
The information contained in this site is of a general nature and should not be acted upon in your specific situation
without further details and/or professional assistance.
If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list
to receive other tax-cutting information from time to time, please contact our office. We're here to help.
