taxation of alimony - US law

hope anybody can provide information:


we are american citizens and live in Asia. My son and I are receiving alimony payment which is transfered to us each month directly from my ex-husbands company - not his private account.


Now my question: must I assume that the money is deducted from his gross salary, so is not yet income taxed hence still subject to tax payment by myself?

Or is it, that I can consider the money send to us as our net income?


Am confused on this point. I've never been involved in (our) money issues and do not get a clear answer from my ex on this either. us being Americans and subject to double taxation, am sure there is a way for him/the company to juggle money around to avoid tax where ever possible (within legal boundaries of course).


Am affraid this is going to be at my and our sons' expenses, even though we clearly agreed in our settlement that whatever we receive from him is net and not to worry about any further!

thank you very much. our divorce is only effective since early 2007 and all financial issues regarding 2006 have been taken care of by my ex husband.


our settlement states that my child and I each receive a monthly maintainance sent as one sum to me.

The amount is defined as two, as conditions for stopping to pay to either me or the child differ.


So how to do, to still receive that money net? Demand amount is adusted to meet agreed net after tax? Would this be reasonable and stand a chance if I renegotiate our settlement?

I might be wrong, but I don't think there is such a thing as "Payment net of taxes" as far as IRS is concerned. (it is a common mainland Chinese practice.) As Aijin mentioned before, as a US citizen you are required by law to file income tax return. So nothing short of renouncing you US citizenship will absolve you of that headache.

If your alimony is negotiated as "net of tax" the most like way it is implemented is that your ex-husband's company has paid withholding tax on your behalf. So sometime early next year, your ex's company will mail you a statement similar to a W-2 form. It will have a full accounting of all money paid to you and to the government. You will then fill those numbers in your tax return. In that case you will mostly get a little extra money back from Uncle Sam. Most company's tend to over withhold a bit of tax, and you can get that back from the government by filing a tax return.

BTW, as US citizens, you are not "double" taxed. Just "global" taxed. The taxes you pay to Hong Kong (if any) can be claimed as a "credit" against US tax liabilities. So you pay the difference between US and HK taxes, not both.

You'd best hire a US tax accountant at least for your 2007 tax return (Deadline is Apr 15, next year. Overseas residents get an extension to Jun 15) It appears you married a US citizen and have never filed for taxes yourself. It can be frustrating task for the uninitiated.

Aijin & Oski: thank you both for reply. matters are much clearer now and i got myself already a list of tax accountants via the embassy.


Just one last thing to have an upfront information; can you estimate the charge to get a tax return done by an accountant service - if done in HK?


hope not an arm and a leg :)

"if your husbands company is paying you then the payments you are receiving are definitely not classified as alimony"


This is not true. Regardless of where the money comes from, if it is a payment made to settle an obligation for spousal maintenance then it is considered alimony. It is extremely common to have the debtor (husband, in this case) authorize payments on his behalf by his employer or third party source of income to the creditor (wife).


While child support is not taxable (nor deductible), alimony is taxable and must be reported.

If and when the IRS puts the bite on her for tax evasion and she pulls the old story about the divorce decree stating that her alimony is net, I'd like to be there to laugh my rear off. ;)

You could be right. I do think that the former Mrs. isn't exactly the sharpest knife in the drawer either.

wow. thanks for so many constructive replies and even the to mean ones I'll give meaning and pay consideration.


SWTFP: thanks for clearing all in one sentence. I will check your companies web-site and if you have an office in the city I'm living (it's not Hong Kong) I'll certainly contact them!