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Maintenance v
Child Support: pay more to pay less and everyone wins.
While it is
difficult often to convince the payor client that he/she
 should pay
their spouse more in support in order to save money, the following
analysis provides an example of how this can happen. Note that $10,000
paid in child support in this example results in the Paying Spouse
paying $10,000 and the Receiving Spouse receiving $10,000. By
restructuring as maintenance, the Receiving Spouse pays $14,000 gross
but because of tax savings only pays $8,400, whereas the Receiving
Spouse is actually receiving $11,200. Everyone wins, except Uncle Sam,
who is out $2,800.
| |
Paying Spouse |
Receiving Spouse |
|
|
Incremental Tax Bracket, Federal, State &
Local |
40% |
20% |
|
|
|
|
|
|
|
Payment Structured as Child Support: |
|
|
|
|
Child Support Payment |
(10,000) |
10,000 |
|
|
Net Position |
(10,000) |
10,000 |
|
|
|
|
|
|
|
Higher Payment Structured as Maintenance |
(14,000) |
14,000 |
|
|
Less income taxes |
5,600 |
(2,800) |
|
|
Net Position |
(8,400) |
11,200 |
|
|
|
|
|
|
|
Tax Savings |
1,600 |
1,200 |
2,800 |
More to come...
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