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RD
RD, Certified Public Accountant (CPA)
Category: Finance
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Experience:  MBA, CPA
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I am getting divorced. The mediator recommended that instead

Resolved Question:

I am getting divorced. The mediator recommended that instead of paying spousal support (deductible) and child support (not deductible) I should pay "family support" which would be fully deductible by me, and my wife would pay the taxes. The benefit is supposed to be that my wife will be on lower tax brackets and will have a mortgage payment that she could deduct from the income and wipe out most of her taxes and reduce my taxes at the same time. ALl seems reasonable given that my income is over $200k and my wife doesn't work. The question is this: Is this effective from an AMT tax position. Can I deduct the payments to my wife from the ATM calculations? WHat is the most tax effective thing to do?

Thanks
Submitted: 4 years ago.
Category: Finance
Expert:  RD replied 4 years ago.

RD :

Normally, If the divorce decree or separation instrument provides for "family support" but no amount of the family support is designated as child support, then the entire payment is considered alimony and hence is deductible. So the amount paid will be deductible for alternative minimum tax purposes too.

RD :

Amounts paid under divorce or separate maintenance decrees or written separation agreements entered into between you and your spouse or former spouse will be considered alimony for Federal tax purposes if:



  • You and your spouse or former spouse do not file a joint return with each other

  • You pay in cash (including checks or money orders)

  • The payment is received by (or on behalf of) your spouse or former spouse

  • The decree of divorce or separate maintenance does not say that the payment is not alimony

  • If legally separated under a decree of divorce or separate maintenance, you and your former spouse are not members of the same household when you make the payment

  • You have no liability to make the payment (in cash or property) after the death of your spouse or former spouse, and

  • Your payment is not treated as child support or a property settlement

RD :

If you and your ex can agree on considering the entire lump-sum payment as Alimony than this would be the most tax effective way of doing things

Customer:

So this would be deductible for AMT tax calculations as well?

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