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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 3090
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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Hi, I am about to move to Japan and I pay alimony to my US-resident

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Hi, I am about to move to Japan and I pay alimony to my US-resident ex-spouse.

Here is the situation:
1) Me: Resident in Japan, paying JP taxes and alimony to ex-.

2) Ex-spouse: Resident of US, California

Here is what I found in the US-Japan Tax Treaty:

"3. Periodic payments, made pursuant to a written separation agreement or a decree of divorce, separate maintenance, or compulsory support, including payments for the support of a child, paid by a resident of a Contracting State to a resident of the other Contracting State shall be taxable only in the first-mentioned Contracting State. However, such payments shall not be taxable in either Contracting State if the individual making such payments is not entitled to a deduction for such payments in computing taxable income in the first-mentioned Contracting State."

It seems that if Japan does not allow to deduct alimony payments then neither I nor my Ex- will have to pay taxes on the alimony payments?

Is my understanding of the treaty correct?

Thank you!

bkb1956 :

Thank you for allowing me to be of service to you regarding your tax question. According to the IRS guidelines, alimony is generally included in the taxable income of the recipient and a deduction to the person paying the alimony. Your quote of the Tax Treaty means that if the person making the alimony payments cannot utilize those payments as a deduction, the person receiving the alimony payments does not have to include those payments as income.

Customer:

But what would be my situation in this case then? Because the treaty says the payments shall not be taxable in either Contracting State. Does that mean I would not have to pay taxes either?

Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 3090
Experience: 18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
Barbara and 4 other Tax Specialists are ready to help you
Hello and thank you for using Just Answer,
Not really, if you are a US citizen and will be abroad then you would still need to file your US tax return and report all income and deductions. You would be allowed to use the alimony deduction against your US income tax obligation and your spouse would still report the income on their return.
If on the other hand your ex-spouse was in Japan and not a US person and they were not taxed on the alimony payments, you here in the US would not be allowed to deduct the alimony from your income.