US Income Tax Question

[sly_wolf 199]

I was wondering if anyone can answer this question regarding US income taxes and foreign spousal/child support.

I am Canadian (divorced) and currently pay spousal and child support to my ex-wife who also lives in Canada.

If I have moved to the US on a K3 option and then file a US income tax, is this foreign spousal or child support tax deductable?

[zyggy 9]

I was wondering if anyone can answer this question regarding US income taxes and foreign spousal/child support.

I am Canadian (divorced) and currently pay spousal and child support to my ex-wife who also lives in Canada.

If I have moved to the US on a K3 option and then file a US income tax, is this foreign spousal or child support tax deductable?

Child Support is not tax deductable in the US...

You can deduct the alimony paid to your foreign ex-spouse, but will have to withhold and pay a 30% non-resident alien tax to the IRS...

From IRS Publication 504

Withholding on nonresident aliens. If you are a U.S. citizen or resident and you pay alimony to a nonresident alien spouse, you may have to withhold income tax at a rate of 30% (or lower treaty rate) on each payment. For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

What this means is that you would have to withold 30% tax on her US source Income from you, but she would get a foreign tax credit on 30% tax you witheld on the alimony on her Canadian Tax return due to the US/Canada Tax Treaty...

I suggest that you consult with a cross border tax professional to set up the witholding of taxes from her alimony from you and assist her with how to report it on her T4...

Edited January 4, 2007 by zyggy

[sly_wolf 199]

Ok thanks. Good to know, but unfortunately any type of arrangement with my ex-wife has always turned into a big nightmare and I always wind up getting abused

Oh well, still lots of time before I have to worry about that. At least I understand the financial impact a bit better.