We have been exploring why guys hate paying alimony when the reality is that paying alimony can be used to the financial advantage of a man during a divorce.
We have already discussed in part 1 that alimony is tax deductible. In part 2, we talked about the fact that alimony reduces your gross income for child support purposes, which will reduce your child support obligation.
In part 3, we are going to talk about the effect of paying the mortgage-or mortgages-on the family home has on alimony and child support.
One of the larger complaints I get from men is that women do not appreciate the financial hardship of a husband who is trying to do the right thing, paying for everything, and cannot afford to live anywhere except back at his parents or in a rented room that is hardly conducive to having the children stay there.
Imagine paying alimony, child support, the mortgages and lot of other family and child-related expenses before even being able to pay for anything for yourself. It is horrible and overwhelming, and it can lead to resentment and all sorts of negative consequences.
It is extremely important to have a divorce attorney who can explain this to the master or judge in simple, financial terms that are easily understandable and compelling. The best way to do this is to add it all up, compare it to your net income and show the percentage of net income being used.
Here is a simple example.
Alimony $1000 per month
Child Support $1500 per month
Mortgage Payments $2500 per month
Total Monthly Payments: $5000 per month
Husband’s Net Monthly $7500 per month
It does not take a rocket scientist to see that 2/3 of the Husband’s net month income is going to family expenses, yet of the $5000 he is paying, $1000 of it is deductible as alimony, although the $2500 of monthly mortgage payments may also be deductible.
In this type of a situation, I will recommend to the husband to agree to lower child support, higher alimony, paying all of the mortgage payments, as well as getting the dependency deductions for the child or children. A trusted CPA/tax advisor can easily calculate the savings to the husband.
More importantly, where the wife is not earning a huge amount of money, the child support creates no tax to her, and she is paying a very small amount of tax on the alimony, and she is likely in such a low income tax bracket that it does not have a major adverse consequence to her.
Right now, you are either “getting this” or you are completely baffled by the math and by the child support that makes no sense. That is why you need a divorce attorney with extensive knowledge of these financial relationships on your team.
There is one concept left to explore in part 4, which is the interplay of a monetary award on all of these calculations.