Student Loans and Alimony

[Anonymous]

Divorced earlier this year and I was looking at the student load website and looking at the income driven repayment plan. Confused as what my options are and thought I would ask for some advice. I take home $6200 per month after insurance, taxes and etc. I pay my ex wife $3,000 per month alimony. My rent here in CT is $2500. This leaves me $700 per month, not including car insurance, gas, food, electricity, etc. How do they expect me to pay $900 per month? What type of income driven repayment plan is this if they don't take into consideration what you pay out? 

[Anonymous]

Under the IRS rules of not being able to deduct my alimony to lower my AGI, shouldn't they update the IBR rules?

"Under these plans, your required monthly payment is generally a percentage of your discretionary income. For all three plans, your discretionary income is the difference between your adjusted gross income (AGI) and 150 percent of the U.S. Department of Health and Human Services (HHS) Poverty Guideline amount for your family size and state."

[ccquest]

Just going to say something that won't help at all, but it's income based or driven, not available money or situation based, just income. It's the most even way they can apply something to everybody like taxes.

I don't know how it works for you, but this sounds like something you need to bring up in divorce court and get your alimony payment changed, require your ex to make the student loan payment, get onto a deferment/forbearance asap, or refinance the loan to a longer term somewhere else to lower the payment (depends on the loan balance).

[calyx]

I was about to say - since all of the IDR plans are AGI driven, it might be difficult, but a little internet research (I realize, not perfect) tells me that alimony paid is taken into consideration for your AGI (here's the AGI page at investopedia for one).   I would call your servicer for guidance.   

Even as a single, no-dependents earner, the loan calculator isn't very good at estimating what I pay, so going straight to your servicer will probably be your best bet on payment there.

[pizzadude]

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@Anonymous wrote:

Under the IRS rules of not being able to deduct my alimony to lower my AGI, shouldn't they update the IBR rules?

"Under these plans, your required monthly payment is generally a percentage of your discretionary income. For all three plans, your discretionary income is the difference between your adjusted gross income (AGI) and 150 percent of the U.S. Department of Health and Human Services (HHS) Poverty Guideline amount for your family size and state."

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I'm not a CPA or tax expert but if you're paying alimony it should count as an adjustment to income and would be deductible ( i.e. on line 10 of form 1040 ) which would then lower your AGI ( line 11 of form 1040 ).

[Anonymous]

Unfortunately, alimony is no longer tax deductible effective 2019 I believe under Trump's new tax policy.

[pizzadude]

Thanks @Anonymous !  Here's a link to the IRS guidance on this:   

https://www.irs.gov/forms-pubs/clarification-changes-to-deduction-for-certain-alimony-payments-effective-in-2019