How Is Child Support & Alimony Calculated In New York?

child support and alimony calculation in New York

For purposes of child support, either parent can be named the custodial parent by a Court.  For the purposes of this article we will assume that the mother is the custodial parent and will be receiving the child support and alimony payments.  However, fathers who have custody can also use this as a guide.

How do I apply for child support?

Usually, you ask for child support in Family Court in the county where you and the child live.   You can also go for child support in the county where the father lives.  You are not required to have a lawyer to apply for child support but it is recommended that you consult with a divorce attorney prior to filing for support.

How is the dollar amount of child support calculated?

The Child Support Standard Act (CSSA) is the law in NYS and tells the amount of child support the father must pay.  The CSSA applies to parental income up to a maximum of $181,000 (2021 limit) and the Court can apply it to income in excess of $148,000 based on certain factors. Examples of these factors are: the financial ability of the father, the lifestyle the child would have enjoyed if the parents stayed living together, and any special needs the child may have. The maximum can be adjusted periodically by the New York State legislature. The amount you get depends on what the father’s income is, what your income is, how many children you have together, and what your children’s basic needs are

The Support Magistrate will look at the information in your financial disclosure affidavit and the father’s financial disclosure affidavit, if he supplies one. The Support Magistrate might also ask you and the father to answer questions. And you and he might be asked to give the Support Magistrate other evidence of your income and expenses, such as a paystub or a W-2 statement.

Both parents’ incomes are used to figure out how much child support the father has to pay because both parents have to support their children.

This is how it is calculated:

Deduct (subtract) these things from each parent’s income:

• spousal maintenance paid to a former husband or wife by court order

• child support paid to other children by court order

• public assistance and supplemental security income (SSI)

• city taxes

• social security and Medicare taxes (FICA)

Combine (add) the incomes of both parents after making those deductions, and multiply the total you get by the correct percentage:

• 17% for one child

• 25% for two children

• 29% for three children

• 31% for four children

• Not less than 35% for five children or more

Divide the figure you get between both parents according to both your incomes (on a “pro rata” basis). This means that if the father earns twice as much as you, he must pay twice as much child support.

The father may also have to pay additional amounts for:

• child care, if you are working or going to school.

• medical care not covered by insurance

• the child’s educational expenses

The parent who has health insurance must also (if reasonable) continue providing health insurance for your children. The cost of providing health insurance will be shared between yourself and the father, in proportion to your respective incomes. If neither of you has health insurance, the court will order the custodial parent (the parent with the greatest amount of custody) to apply for the state’s child health insurance plan.

When do child support payments stop?

Child support payments typically end when the child reaches age 21 or becomes emancipated.  Emancipation means a child is living separately and independently from a parent, or is self –supporting.   Some things that show that a child is emancipated are:

• Child has completed 4 years of college education

• Child has gotten married

• Child is living away from home (except for living at school or college)

• Child has gone into the military

• Child is 17 years old and working full-time (except for summer vacation jobs)

• Child willingly and fro no good reason has ended the relationship with both parents

alimony calc

In New York, alimony is referred to in three different ways: as alimony, spousal support, and maintenance.  “Temporary maintenance” is an order that one spouse must financially support the other while the divorce is being finalized.  Once the divorce is finalized, the temporary maintenance stops and the judge decides whether permanent alimony is appropriate.

How is the amount of alimony payments determined?

Unlike child support payments there really are no set guidelines for the amount and duration of alimony payments.   To decide whether spousal support is appropriate, the judge will look at the needs of the spouse asking for support and whether the other spouse has the financial ability to provide financial help. For example, if your income is lower than your spouse’s but you are able to support yourself, you may not be entitled to alimony. The court will also look at other factors when making a decision about support:

• the length of the marriage

• each spouse’s age and health status

• each spouse’s present and future earning capacity

• the need of one spouse to incur education or training expenses

• whether the spouse seeking maintenance is able to become self-supporting

• whether caring for children inhibited one spouse’s earning capacity

• equitable distribution of marital property, and

• the contributions that one spouse has made as a homemaker in order to help enhance the other spouse’s earning capacity.

The court will also look to see whether the acts of one spouse have inhibited or continue to inhibit the other spouse’s earning capacity or ability to obtain employment. The most common example of this would be domestic violence. If one spouse’s abuse of the other affected that abused spouse’s ability to maintain or to get a job, the court might consider those actions in making its order. Disclosure:  The information listed above is for educational purposes only.  Greenbush Financial Group, LLC does not provide legal advice.  For legal advice, please consult your attorney. 

Michael Ruger

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Sample Business Plan

Sample Business Plan

The business plan for a startup business provides entrepreneurs with a guide in creating a business plan and items to consider when starting a new business. 

Click on the PDF link in the green box below. 

Types of Retirement Plans

Types of Retirement Plans

RC2

The comparing retirement plans chart gives business owners the ability to compare different types of plans available to their company. 

Click on the PDF link in the green box below.

Expense Planner

Expense Planner

The expense planner is used to determine your annual after tax expenses both now and in retirement. 

Click on the PDF link in the green box below.

EP 1

EP 2

Expense Planner

Financial Planning Questionnaire

FP Questionnaire

Financial Planning Questionnaire

The financial planning questionnaire is used to gather information in the initial phase of the financial planning process with Greenbush Financial Group.

Click on the PDF link in the green box below. 

Year End Tax Strategies

year end tax strategies

The end of the year is always a hectic time but taking the time to sit with a tax professional and determine what tax strategies will work best for you may save thousands on your tax bill due April 15th.  As the deadline for your taxes starts to get closer, you may be in such a rush to file them on time that you make some mistakes in the process, but don't worry, you won't be the only one.  If you don't have the relevant tax strategy in place, you are more prone to mistakes. So, the purpose of this article is to discuss some of the most common tax strategies that may apply to you. It may be worth contacting a company that specializes in tax services if you're unsure of how to go about these strategies though. Some of the deadlines for these strategies aren't until tax filing but the majority include an action item that must be done by December 31st to qualify and therefore taking the time before year end is crucial.

Taxable Investment Accounts

Offset some of the realized gains incurred during the year by selling investments in loss positions. Often times dividends received and sales made in a taxable investment account are reinvested. Although the owner of the account never received cash in the transaction, the gain is still realized and therefore taxable. This may cause an issue when the cash is not available to pay the tax bill. By selling investments in a loss position prior to 12/31, you will offset some, if not all, of the gain realized during the year. If possible, sell enough investments in a loss position to take advantage of the maximum $3,000 loss that can be claimed on your tax return.

Note: The IRS recognized this strategy was being abused and implemented the "wash sale" rule. If you sell an investment in a loss position to diminish gains and then repurchase the same investment within 30 days, the IRS does not allow you to claim the loss therefore negating the strategy.

Convert a Traditional IRA to a Roth IRA

If you are in a low income year and will be taxed at a lower tax bracket than projected in the future, it may make sense to convert part of a traditional IRA to a Roth IRA. The current maximum contribution to a Roth IRA in a single year is $5,500 if under 50 and $6,500 if 50 plus. You will pay taxes on the distributions from the traditional but the benefit of a Roth is that all the contributions and earnings accumulated is tax free when distributed as long as the account has been opened for at least 5 years. Roth accounts are typically the last touched during retirement because you want the tax free accumulation as long as possible. Also, Roth accounts can be passed to a beneficiary who can continue accumulating tax free. Roth money is after tax money and therefore the IRS allows you to withdraw contributions tax and penalty free and let the earnings continue to accumulate tax free. If you don't have the cash come tax time to cover the conversion, you can convert the Roth money back to a traditional IRA by tax filing plus extension and the account will be treated as the Roth conversion never took place.

Donate to Charity if you Itemize

If you itemize deductions on your tax return, go through your closet and donate any clothing or household goods that you no longer use. There are helpful tools online that will allow you to value the items donated but be sure you keep record of what was donated and have the charity give you a receipt.

Max Out Your Employer Sponsored Retirement Plan

If you know you will be hit with a big tax bill and want to defer some of the taxes, max out your retirement plan if you haven't already. Employer sponsored plans, such as 401(k)'s, must be funded through payroll by 12/31 and therefore it is important to make this determination early and request your payroll department start upping your contribution for the remaining payroll periods in the year. The maximum for 401(k)'s in 2015 and 2016 is $18,000 if under 50 and $24,000 if 50 plus.

Business Owners – Cut Checks by 12/31

If your company had a great year and the cash is available, use it to pay for expenses you would normally hold off on. This could mean paying state taxes early, paying invoices you usually wait until the end of the payment term, paying monthly expenses like health or general insurance, or buying new office equipment. This might also mean investing in new office furniture such as chairs and desks, or more storage space for all of your paperwork and electronics.  Above all, by getting the checks cut by 12/31, you realize the expense in the current year and will decrease your tax bill.

Business Owners – Set Up a Retirement Plan

For owners with no full time employees, a Single(k) plan being put in place by 12/31 will allow you to fund a retirement account up to the 401(k) limits mentioned early. As long as the plan is established by 12/31, the owner will be able to fund the plan any time before tax filing plus extension. If the plan is not established by 12/31, other options like the SEP IRA are available to take money off the table come tax time.With tax laws continuously changing, it is important to consult with your tax professional as there may be strategies available to you that could save you money. Don't procrastinate as some planning before the end of the year may be necessary to take full advantage.

About Rob.........

Hi, I'm Rob Mangold. I'm the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally , professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, pleas feel free to join in on the discussion or contact me directly.

Should I Establish an Employer Sponsored Retirement Plan?

establishing an employer sponsored retirement plan

Employer sponsored retirement plans are typically the single most valuable tool for business owners when attempting to:

• Reduce their current tax liability

• Attract and retain employees

• Accumulate wealth for retirement

But with all of the different types of plans to choose from which one is the right one for your business? Most business owners are familiar with how 401(k) plans works  but that might not be the right fit given variables such as:

• # of Employees

• Cash flows of the business

• Goals of the business owner

There are four main stream employer sponsored retirement plans that business owners have to choose from:

• SEP IRA

• Single(k) Plan

• Simple IRA

• 401(k) Plan

Since there are a lot of differences between these four types of plans we have included a comparison chart at the conclusion of this newsletter but we will touch on the highlights of each type of plan.

SEP IRA PLAN

This is the only employer sponsored retirement plan that can be setup after 12/31 for the previous tax year. So when you are sitting with your accountant in the spring and they deliver the bad news that you are going to have a big tax liability for the previous tax year, you can establish a SEP IRA up until your tax filing deadline plus extension, fund it, and take a deduction for that year.

However, if the company has employees that meet the plan's eligibility requirement, these plans become very expensive very quickly if the owner(s) want to make contributions to their own accounts. The reason being, these plans are 100% employer funded which means there are no employee contributions allowed and the employer contribution is uniform for all plan participants. For example, if the owner contributes 15% of their income to the SEP IRA, they have to make an employer contribution equal to 15% of compensation for each employee that has met the plans eligibility requirement. If the 5305-SEP Form, which serves as the plan document, is setup correctly a company can keep new employees out of the plan for up to 3 years but often times it is either not setup correctly or the employer cannot find the document.

Single(k) Plan or "Solo(k)"

These plans are for owner only entities. As soon as you have an employee that works more than 1000 hours in a 12 month period, you cannot sponsor a Single(k) plan.

The plans are often times the most advantageous for self-employed individuals that have no employees and want to have access to higher pre-tax contribution levels. For all intents and purposes it is a 401(k) plan, same contributions limits, ERISA protected, they allow loans and Roth contributions, etc. However, they can be sponsored at a much lower cost than traditional 401(k) plans because there are no non-owner employees. So there is no year-end testing, it's typically a boiler plate plan document, and the administration costs to establish and maintain these plans are typically under $400 per year compared to traditional 401(k) plans which may cost $1,500+ per year to administer.

The beauty of these plans is the "employee contribution" of the plan which gives it an advantage over SEP IRA plans. With SEP IRA plans you are limited to contributions up to 25% of your income. So if you make $24,000 in self-employment income you are limited to a $6,000 pre-tax contribution.

With a Single(k) plan, for 2021, I can contribute $19,500 per year (another $6,500 if I'm over 50) up to 100% of my self-employment income and in addition to that amount I can make an employer contribution up to 25% of my income. In the previous example, if you make $24,000 in self-employment income, you would be able to make a salary deferral contribution of $18,000 and an employer contribution of $6,000, effectively wiping out all of your taxable income for that tax year.

Simple IRA

Simple IRA's are the JV version of 401(k) plans. Smaller companies that have 1 – 30 employees that are looking to start are retirement plan will often times start with implementing a Simple IRA plan and eventually graduate to a 401(k) plan as the company grows. The primary advantage of Simple IRA Plans over 401(k) Plans is the cost. Simple IRA's do not require a TPA firm since they are self-administered by the employer and they do not require annual 5500 filings so the cost to setup and maintain the plan is usually much less than a 401(k) plan.

What causes companies to choose a 401(k) plan over a Simple IRA plan?

• Owners want access to higher pre-tax contribution limits

• They want to limit to the plan to just full time employees

• The company wants flexibility with regard to the employer contribution

• The company wants a vesting schedule tied to the employer contributions

• The company wants to expand investment menu beyond just a single fund family

401(k) Plans

These are probably the most well recognized employer sponsored plans since at one time or another each of us has worked for a company that has sponsored this type of plan. So we will not spend a lot of time going over the ins and outs of these types of plan. These plans offer a lot of flexibility with regard to the plan features and the plan design.

We will issue a special note about the 401(k) market. For small business with 1 -50 employees, you have a lot of options regarding which type of plan you should sponsor but it's our personal experience that most investment advisors only have a strong understanding of 401(k) plans so they push 401(k) plans as the answer for everyone because it's what they know and it's what they are comfortable talking about. When establishing a retirement plan for your company, make sure you consult with an advisor that has a working knowledge of all these different types of retirement plans and can clearly articulate the pros and cons of each type of plan. This will assist you in establishing the right type of plan for your company. 

Michael Ruger

About Michael.........

Hi, I'm Michael Ruger. I'm the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

How is my Social Security Benefit Calculated?

how is social security calculated

The top two questions that we receive from individuals approaching retirement are:

• What amount will I received from social security?

• When should I turn on my social security benefits?

Are you eligible to receive benefits?

As you work and pay taxes, you earn Social Security “credits.” In 2015, you earn one credit for each $1,220 in earnings—up to a maximum of four credits a year. The amount of money needed to earn one credit usually goes up every year. Most people need 40 credits (10 years of work) to qualify for benefits.

When will I begin receiving my social security benefit?

You are entitled to your full social security benefit at your “Normal Retirement Age” (NRA).  Your NRA varies based on your date of birth.  Below is the chart that social security uses to determine your “normal retirement age” or “full retirement age”:

social security retirement age

For example, if you were born in 1965, your NRA would be 67.  At 67, you would be eligible for your full retirement benefit.

Delayed Retirement or Early Retirement

You can claim benefits as early as age 62, but your monthly check will be cut by 25% for the rest of your life.  The way the math works out, for each year you take your social security benefit prior to your normal retirement age, you benefit is permanently reduce by 6% for each year you take it prior to your NRA.

On the opposite end of that scenario, if you delay claiming past your NRA, you will get a delayed credit of approximately 8% per year plus cost of living adjustments.

There are a number of variables that factor into this decision as to when to turn on your benefit.  Some of the main factors are:

• Your health

• Do you plan to keep working?

• What is your current tax bracket?

• The amount of retirement savings that you have

• Income difference between spouses

social security age chart

What amount will I receive from social security?

Social security uses a fairly complex formula for calculating social security retirement benefits but the short version is the formula uses your highest 35 years of income. If you have less than 35 years are income, zeros are entered into the average for the number of years you are short of 35 years of income.  They also apply an inflation adjustment to your annual earnings in the calculation.

You can obtain your Social Security statement by creating an account at www.ssa.gov. Your statement contains lots of valuable information, such as:

• Your estimated benefit amount at full retirement age

• Eligibility for benefits

• A detailed history of how much you've earned each year

Keep in mind that the figures in your statement are just estimates, and your eventual benefit amount could be quite different, especially if you're relatively young now. 

Michael Ruger

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Can I Receive Social Security Benefits While I'm Still Working?

can i receive social security while I'm still working

The short answer is "Yes". But you may not want to depending on when you plan to turn on your social security benefits and how much you plan to earn each year from working.

Electing social security benefits AFTER your Normal Retirement Age

For social security, your Normal Retirement Age (NRA), is the age you are eligible to receive full retirement benefits. Your NRA is based on your date of birth and the table is listed below:

delaying social security

Once you reach your NRA, you are allowed to begin receiving social security benefits without having to worry about the social security "earnings test". Meaning that you can earn as much as you want working and they will not reduce your social security benefit. You are free and clear.

Electing social security benefits BEFORE your Normal Retirement Age

If you turn on your social security benefits prior to reaching your Normal Retirement Age, you will be subject to the "earnings test" each year. For social security recipients who will not reach full retirement age in the 2016 calendar year, the first $15,720 in earnings is exempt. Beyond that amount, every $2 in earnings will reduce your social security benefits by $1. It's a fairly steep penalty. The general rule is if you plan to earn over the $15,720 threshold and you will not hit your normal retirement age for social security in 2016, do not elect to begin taking social security early because you will lose most of it from the "earned income penalty".

Electing social security benefits in the year your reach "Normal Retirement Age"

For social security recipients who will attain full retirement age during 2016, the first $41,880 is exempt, and the reduction is just $1 for every $3 in earnings beyond that point. Plus, only the months before your birthday count toward the total.

We advise our clients in this situation to keep their pay stub from the payroll period prior to reaching Normal Retirement Age because the IRS may contact them the following year to prove the amount of income that they earned prior to receiving their first social security payment.

Michael Ruger

About Michael.........

Hi, I'm Michael Ruger. I'm the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

How Much Life Insurance Do I Need?

How Much Life Insurance Do I Need?

Do you even need life insurance? If you have dependants to protect and you do not have enough savings, you will most likely need life insurance. But the question is how much should I have? Well, your home will be one of your biggest assets, and in some cases the money that it makes from its sale when you have passed away is a significant inheritance for your children.

If you do not have dependents or you have enough savings to cover the current and future expenses for your dependents there really is no need for life insurance. Life insurance sales professional can be very aggressive with their sales tactics and sometime they mask their services as "financial planning" but all of their solutions lead to you buying an expensive whole life insurance policy.

Remember, life insurance is simply a transfer of risk. When you are younger, have a family, a mortgage, and are just starting to accumulate assets, the amount of life insurance coverage is usually at its greatest. But as your children grow up, they finish college, you pay your mortgage, you have no debt, and you have accumulated a good amount in retirement savings, your need to transfer that risk diminishes because you have essentially become self-insured. Just because you had a $1M dollar life insurance policy issued 10 years ago does not mean that is the amount you need now.

Which kind of insurance should you get?

It's our opinion that for most individuals term insurance makes the most sense. Insurance agents are always very eager to sell whole life, variable life, and universal life policies. Why? They pay big commissions!! When you compare a $1M 30 year term policy and a $1M Whole Life policy side by side, often times the annual premium for whole life insurance is 10 times that amount of the term insurance policy. Insurance agents will tout that the whole life policy has cash value, you can take loans, and that it's a tax deferred savings vehicle. But often time when you compare that to: "If I just bought the cheaper term insurance and did something else with the money I would have spent on the more expensive whole life policy such as additional pre-tax retirement savings, college savings for the kids, paying down the mortgage, or setting up an investment management account, at the end of the day I'm in a much better spot financially."

How much life insurance do you need?

The most common rule of thumb that I hear is "10 times my annual salary". Please throw that out the window. The amount of insurance you need varies greatly from individual to individual. The calculation to reach the answer is fairly straight forward. Below is the approach we take with our clients:

• How much debt do you have? This includes mortgages, car loans, personal loans, credit cards, etc. Your total debt amount is your starting point.

• What are your annual expenses? Just create a quick list of your monthly expenses, they do not have to be exact, and our recommendation is to estimate on the high side just to be safe. Then multiply your monthly expense by 12 months to reach your "annual after tax expenses".

• How much monthly income do you have to replace? If you are married, we have to look at the income of each spouse. If your monthly expenses are $50,000 per year and the husband earns $30,000 and the wife earns $80,000, we are going to need more insurance on the wife because we have to replace $80,000 per year in income if she were to pass away unexpectedly. Married couples make the mistake of getting the same face value of insurance just because. Look at it from an income replacement standpoint. If you are a single parent or provider, you will just look at the amount of income that is needed to meet the anticipated monthly expenses for your dependents.

• Factor in long term savings goals and expenses. Examples of this are the college cost for your children and the annual retirement savings for the surviving spouse.

Example:

• Husband: Age 40: Annual Income $70,000

• Wife: Age 41: Annual Income $70,000

• Children: Age 13 & 10

• Total Outstanding Debt with Mortgage: $250,000

• Total Annual After Tax Expenses: $90,000

• Savings & Investment Accounts: $100,000

Remember there is not a single correct way to calculate your insurance need. This example is meant to help you through the thought process. Let's look at an insurance policy for the husband. We first look at what the duration of the term insurance policy should be. Our top two questions are "when will the mortgage be paid off?" and "when will the kids be done with college?" These are the two most common large expenses that we are insuring against. In this example let's assume they have 20 years left on their mortgage so at a minimum we will be looking at a 20 year term policy since the youngest child will done with their 4 year degree within the next 12 years. So a 20 year term covers both.

Here is how we would calculate the amount. Start with the total amount of debt: $250,000. That is our base amount. Then we need to look at college expense for the kids. Assume $20K per year for each child for a 4 year degree: $160,000. Next we look at how much annual income we need to replace on the husband's life to meet their monthly expense. In this example it will be close to all of it but let's reduce it to $60K per year. It is determined that they will need their current level of income until the mortgage is paid in full so $60,000 x 20 Years = $1,200,000. When you add all of these up they will need a 20 year term policy with a death benefit of $1,610,000. But we also have to take into account that they already have $100,000 in savings and their levels of debt should decrease with each year as time progresses. In this scenario we would most likely recommend a 20 Year Term Policy with a $1.5M death benefit on the husband's life.

The calculation for his wife in this scenario would be similar since they have the same level of income.

Michael Ruger

About Michael.........

Hi, I'm Michael Ruger. I'm the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.