The Immoral and Unethical Taxation of Alimony:
A Case Study Highlighting the Ethical and Practical
Implications of Cross-Border Tax Burdens
Ian Y.H. Chua
1, 2, 3, 4
6 January 2025
Abstract
This paper examines the moral and practical implications of excessive taxation on
alimony through a case study of a South Korean woman who is a U.S. Permanent Resident
and divorced prior to January 1, 2019. Awarded $30 million in alimony by a New York
court, the recipient’s tax obligations under U.S. and South Korean law exceed 50% of the
awarded amount. This disproportionate tax burden undermines the intent of family
courts to provide adequate support for custodial parents and their children. Detailed tax
calculations demonstrate the cumulative tax eects, and the paper proposes policy
reforms to mitigate such inequities.
1. Introduction
Alimony is intended to ensure nancial stability for divorced individuals and their
dependents, particularly in cases where the recipient is a custodial parent. However, the
taxation of alimony, particularly in cross-border contexts, can drastically reduce its
intended benet. This paper explores the taxation issues through a case study of a South
Korean woman, hereafter referred to as "Ms. K."
2. Case Study Overview
2.1 Background Ms. K. is a South Korean national and a U.S. Permanent Resident. She
divorced her spouse in 2018 in New York, where a court awarded her $30 million in
alimony. The payment was nalized in December 2024, and Ms. K. is the sole custodian
of her 5-year-old son.
2.2 Alimony Tax Rules Under U.S. tax law applicable to divorces nalized before January
1, 2019, alimony is taxable to the recipient and deductible for the payor. In South Korea,
global income is taxed at progressive rates, with a top rate of 45% for national taxes and
an additional 10% for local taxes.
3. Tax Obligations and Calculations
3.1 U.S. Tax Obligations
3.1.1 Federal Income Tax Alimony received by Ms. K. is subject to the following U.S.
federal income tax brackets for single lers in 2024:
• 10%: Up to $11,000.
• 12%: $11,001–$44,725.
• 22%: $44,726–$95,375.
• 24%: $95,376–$182,100.
• 32%: $182,101–$231,250.
• 35%: $231,251–$578,125.
• 37%: Above $578,125.
Calculation:
• Tax on the rst $578,125: $174,238.25.
• Tax on the remaining $29,421,875 at 37%: $10,882,093.75.
• Total Federal Tax Liability: $174,238.25 + $10,882,093.75 = $11,056,332.
3.1.2 State Income Tax Assuming Ms. K. is subject to New York’s top state tax rate of
10%:
• State Tax Liability: $30,000,000 × 10% = $3,000,000.
3.1.3 Total U.S. Tax Liability
• Federal Tax: $11,056,332.
• State Tax: $3,000,000.
• Total U.S. Tax Liability: $14,056,332.
3.2 South Korea Tax Obligations
3.2.1 National and Local Income Taxes South Korea taxes global income at the
following rates:
• National Tax: 45% of $30,000,000 = $13,500,000.
• Local Tax: 10% of national tax = $1,350,000.
• Total South Korea Tax Liability: $13,500,000 + $1,350,000 = $14,850,000.
3.3 Foreign Tax Credit (FTC) The U.S. provides a Foreign Tax Credit to mitigate double
taxation. However, this only applies to federal taxes:
• U.S. Federal Tax Liability: $11,056,332.
• FTC (limited to U.S. federal liability): $11,056,332.
• Net U.S. Federal Tax Liability After FTC: $0
Total Tax Liability (Post-FTC):
• South Korea: $14,850,000.
• U.S. State Tax: $3,000,000.
• Combined Tax Liability: $14,850,000 + $3,000,000 = $17,850,000.
4. Discussion
4.1 Ethical Implications The combined tax liability exceeds 50% of the awarded alimony,
leaving Ms. K. with less than $12 million to support herself and her son. This undermines
the court’s intent to provide adequate nancial support.
4.2 Policy Recommendations
1. Exempt Alimony from Taxation: Governments should treat alimony as a transfer
of assets rather than taxable income.
2. Cap Tax Rates on Alimony: Introduce reduced tax brackets for alimony
recipients.
3. Strengthen Tax Treaties: Ensure cross-border tax treaties prevent cumulative
burdens exceeding reasonable thresholds.
4. Conclusion
This case study highlights the disproportionate impact of cross-border taxation on
alimony recipients. The fact that over 50% of the alimony intended to support a single
mother and her child is lost to taxation is both immoral and unethical. It is unacceptable
to deprive funds calculated by the court for the sole purpose of ensuring the nancial
stability of a custodial parent and their dependent. Policymakers must address these
inequities to preserve the original intent of alimony and protect the welfare of families.
Acknowledgements
This paper was developed with the assistance of ChatGPT 4.0, which provided insights and renements in the
articulation of philosophical and scientic concepts.
1
Founder/CEO, ACE-Learning Systems Pte Ltd.
2
M.Eng. Candidate, Texas Tech University, Lubbock, TX.
3
M.S. (Anatomical Sciences Education) Candidate, University of Florida College of Medicine, Gainesville, FL.
4
M.S. (Medical Physiology) Candidate, Case Western Reserve University School of Medicine, Cleveland, OH.
References
1. Internal Revenue Service. (2024). U.S. Tax Guide for Individuals. Retrieved from
https://www.irs.gov
2. National Tax Service (South Korea). (2024). Global Income Tax Guide. Retrieved
from https://www.nts.go.kr
3. American Bar Association. (2023). Family Law Quarterly. Retrieved from
https://www.americanbar.org/groups/family_law/
4. OECD. (2023). Tax Policy Reforms 2023. Retrieved from https://www.oecd.org
