CS + Portion of Daycare = ONLY Childcare

[BlueJay]

Here is the situation:

When we separate soon (meaning, move out of our matrimonial home), my ex is going to pay me CS & a portion of daycare for our 2 young children. We are going to have joint custody but they will be with me over 75% of the time.

Here is what he is going to pay me:
CS (table amount) = $972/month total (for 2 children)
Daycare = $358/month total (roughly 30% of gross daycare cost)

Total CS + Daycare = $1330

The problem is, our daycare IS actually $1330 per month so at the end of the day, all the money he is paying me is going directly to daycare and nowhere else. Is this normal?

When our children go to full day school I will actually see a few hundred dollars a month because daycare will go down in price but up until then, I won't see a penny towards day to day expenses.

Thoughts? Is this normal?

Thanks!

[Foredeck]

What are both of your incomes?

It's two different issues, and you shouldn't connect the CS directly to the Day care. The CS is to help you pay for the upbringing of the children.

His portion of the daycare is to pay is prorated share of the net day care expenses. If you make more, and take the deductions, you will receive less.

He should also pay his share of all extraordinary expenses, which include some medical, insurance, some extracurricular expenses.

I think you're viewing it the wrong way, you're not just breaking even at the end of the month. You're basically getting free subsidized (subsidized by him) daycare. This means that you can put the rest of your money into other things.

[BlueJay]

Foredeck, thanks for replying. Sorry if my email sounded like I was trying to "make money" off of my ex. I am not. I am looking at it the wrong way, you are right. I shouldn't lump the two together. When I do lump them together then it just seemed unfair BUT you are right, if he is paying for all of daycare then I can use my money (not a lot of it) for other things. You are right that he is paying the $972 for child support and the $358 is part of daycare and I pay the rest. Thanks for the wake up call!

As for our income:
Him: $65,000 per year
Me: $53,000 per year

Thanks.

[Foredeck]

As for our income:
Him: $65,000 per year
Me: $53,000 per year

Thanks.

Daycare's 1330$ per month, but after tax (since you're taking the deduction), it's 997$. So, lets round it up to 1000$.

The total combined salary is 118k, so his prorated share is 65/118 = 55%.

He should contribute roughly 550$ for daycare.

Also, he should contribute 55% of any health insurance and all those other extraordinary expenses.

So, depending if you want to fight it or not, you should be able to get more from him. But, if he realizes how much he has to pay, he may go for more custody, so that CS is cut in half.

[Mess]

I agree with Foredeck's numbers, but I would note that a negotiated settlement or one from a mediator isn't necessarily identical the the table amounts a court would decide. The point of negotiation is to come to a fair compromise and perhaps a "think outside the box" arrangement that helps the entire family.

In your case, if he is caring for the child a full 25%, this is more than the old-school every-other-weekend. It is providing you with regular time off from being home with the child, you save on babysitting, he is covering more meals etc.

I don't think that a court-style settlement where he pays Child Support at 100% the Table and full proportionate share of child care expenses, while he is still providing a significant amount of child care is necessarily "fair", although you could get this in court.

Staying out of court saves you both thousands, likely tens of thousands. Coming to an arrangement over a few percentage points of child care expenses would probably be the more reasonable approach.

I don't want to seem unsympathetic about your own finances, but face it, kids are expensive and even when our families were together we had tight budgets and high daycare costs.

[BlueJay]

You have both offered some great advice and I thank you for replying.

Mess, we are actually settling this out of court. We are still living together and are very civil with one another. We are writing up our own agreement and trying to agree on everything first and then putting it in the agreement.

I know you weren't being unsympathetic. No worries about that.

As for how much time my ex will see our children - I said 25% of the time but I think it is more like 20%.

Foredeck, how did you come up with the "after tax" amount? I have been looking everywhere for the magic formula and I have come up with nothing so far. I have heard that lawyers have the formula. In any case, if he is supposed to pay $550 for child care and is only paying $350 then I am comfortable with that. The reason being is that he is paying off some debt of ours before we separate AND giving me more money from the sale of our home. I think he is being quite generous (except the part of him that wants to leave our family) so I don't think I will squabble over $200 a month.

Thank you so much Foredeck & Mess. I feel like I am quite informed to do this on our own (i.e. separation agreement) but having a few things cleared up from you guys makes me feel a bit better.

Thanks!

[Dawn is tired....]

No this is NOT normal. He needs to be paying you CS and then his percentage of all other 'Section 7' Extraordinary expenses - which includes childcare. So you need to determine how much you make/income both together and then determine how much his income is of the total (i.e. 60&#37 then he would, in this example, pay you 60% of the daycare on top of your child support. Get a written agreement on this and then you always have the option of filing this signed note with the FRO to garnish his wages when he stops paying you. On the positive side he may never stop paying his share and this letter will collect dust in a cupboard.

[Foredeck]

Foredeck, how did you come up with the "after tax" amount? I have been looking everywhere for the magic formula and I have come up with nothing so far. I have heard that lawyers have the formula. In any case, if he is supposed to pay $550 for child care and is only paying $350 then I am comfortable with that. The reason being is that he is paying off some debt of ours before we separate AND giving me more money from the sale of our home. I think he is being quite generous (except the part of him that wants to leave our family) so I don't think I will squabble over $200 a month.

The after tax is fairly simple. You have to figure out your tax rate. The daycare expense is an allowable tax deduction, so basically, it lowers your taxable earning.

You're top income tax rate is probably around 35%, so, if you have 1000$ in day care expense, you will save 350$ in income tax. The net amount would be 650$.

[Dawn is tired....]

What I have proposed with my ex - because we make equal incomes - is that he pay half the daycare direct *and take the receipt/deduction* and I pay half and I take half the receipt/deduction. Then nobody has to worry about the after tax issues. But get it in writing as if he decides not to pay then you have to - it is daycare - and you will be stuck.

[billiechic]

What I have proposed with my ex - because we make equal incomes - is that he pay half the daycare direct *and take the receipt/deduction* and I pay half and I take half the receipt/deduction. Then nobody has to worry about the after tax issues. But get it in writing as if he decides not to pay then you have to - it is daycare - and you will be stuck.

Can both parents claim the daycare expenses? My ex and I each rotate paying. But I read somewhere that if you pay CS (I pay offset amount) then you can't claim the daycare costs.

Can someone clarify?

[Dawn is tired....]

When your married its the parent who makes less money that HAS to claim the daycare expenses. When you are divorced its whoever actually PAYS and owns the receipt for the expense that can claim it. 100% we have been doing this for years...

[billiechic]

When your married its the parent who makes less money that HAS to claim the daycare expenses. When you are divorced its whoever actually PAYS and owns the receipt for the expense that can claim it. 100% we have been doing this for years...

So I'll just have to ask the daycare to provide us each with a reciept for half of the amount. That shouldn't be too much trouble.