IRS Alimony Recapture Rule

What is the Recapture Rule?
If your alimony payments decrease or end during the first 3 calendar years, you may be subject to the recapture rule. The reasons for a reduction or end of alimony payments that can require a recapture include:

• A change in your divorce or separation instrument,
• A failure to make timely payments,
• A reduction in your ability to provide support, or
• A reduction in your spouse’s support needs.

The recapture rule forces the alimony payer, usually the ex-husband, to report as income the alimony payments he previously deducted, which means the ex-wife is entitled to reduce from income the alimony payments she previously received.

When does the Recapture Rule Apply?
The rule applies when the payments decrease or terminate during the first three calendars years post-divorceand:
1.) The total payments made in the third year decrease by $15,000 or more from the payments made in the second year;or
2.) The payments made in the second year and the third year are substantially less than the payments made in the first year.

Recapture Rule & Filing Taxes:
a) Including the recapture amount in your income: If you must include a recaptured amount in income, show it on Form 1040, line 11 (“Alimony received”). Cross out “received” and enter “recapture.” On the dotted line next to the amount, enter your spouse’s last name and SSN or ITIN.
b) Deducting the recapture amount: If you can deduct a recaptured amount, show it on Form 1040, line 31a (“Alimony paid”). Cross out “paid” and enter “recapture.” In the space provided, enter your spouse’s SSN or ITIN.

Exceptions to the Recapture Rule?
The Recapture Rule does NOT apply to the following:

• Payments made under a temporary support order.
• Payments required over a period of at least 3 calendar years that vary because they are a fixed part of your income from a business or property, or from compensation for employment or self-employment.
• Payments that decrease because of the death of either spouse or the remarriage of the spouse receiving the payments before the end of the third year.

If you need to speak with a family law attorney in regards to alimony, contact Adkins Law. Adkins Law has offices in Huntersville and Ballantyne for your convenience.