Colin and Coleen Are Negotiating the Terms of a Divorce

Essay

Colin and Coleen are negotiating the terms of a divorce in 2018. Colin is willing to pay Coleen $20,000 of alimony for five years so that she can return to school and obtain a degree. Coleen has stated that she needs no less than $20,000 after taxes and will not accept Colin's offer of alimony. Coleen is in the 12 percent tax bracket and Colin is in the 22 percent tax bracket. How much alimony must Coleen receive to have $20,000 after taxes? What is Colin's after-tax cost of this alimony payment?