What Is The Alimony Recapture Rule And How To Avoid It?

You may know that if you are paying alimony (or as it is typically called in New York, spousal maintenance or spousal support), that your payments are a tax deduction. However, there is a little-known rule called the Alimony Recapture Rule. If you fall into this rule, you will not be able to deduct your alimony and worse yet, the alimony you previously deducted will be counted as income.

The rule only applies to alimony payments during the first Three calendar years AFTER the divorce is final AND

a.) The payments in the 3rd year decrease by $15,000 or more from the payments made in the 2nd year; OR

b.) The payments made in the 2nd year and the 3rd year are substantially less than the payments made in the first year.

Here are two examples of when the Alimony Recapture Rule applies:

Example 1:  In the first year you paid $20,000.00 in alimony and in the second year you also pay $20,000 in alimony, but, in the third year you only pay $5,000 in alimony.  Here, your alimony payments decreased by $15,000 from the 2nd year.

Example 2:  In the first year you paid $24,000 in alimony, but, in the 2nd year you only paid $10,000,00 and in the 3rd year you only paid $5,000.00.  Here the payments you made in the 2nd and 3rd year are substantially less than what you paid in the first year.

In the examples stated above, you will have to report as income all three years of deductions that you took as alimony.

There are some limited exceptions to the Alimony Recapture Rule, but, you should consult with an accountant for more information.

It is fairly easy to avoid the Alimony Recapture Rule. When calculating your alimony payments, make sure they are not front loaded and that the amount you pay does not violate the rule.

If you need an attorney, call David Badanes and the Badanes Law Office at 631-239-1702, email at david@dbnylaw.com or visit our web site: www.dbnylaw.com.  The Badanes Law Office has offices in Northport, Garden City, Brooklyn and Manhattan.

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What Is Palimony And Is There Palimony In New York State?

Palimony, a concept that was recognized first in California, has been defined as a form of alimony awarded to one of the partners in a romantic relationship – which is not a sanctioned by a marriage — after the breakup of that relationship following a long period of living together.  In other words, when two non-married people live together, for some length of time, one of the parties is entitled to “alimony” (compensation) based on their living together.

New York has emphatically rejected “palimony” and will not recognize any claims for palimony.  There is no implied contract between unmarried couples living together.  New York Courts have stated that an obligation to pay for friendship (or a romantic relationship) is not to be implied, friendship, like virtue, must be its own reward.

Accordingly, if you are living together as an unmarried couple, no matter how long you have been living together and no matter how many “oral promises” were made, the Courts will not allow you to claim “palimony.”

However, although, an implied contract will not be recognized, unmarried couples are free to enter into written contracts, provided that the written contracts follow all the “normal” rules of contract law.  This means that the written contract must, at a minimum: (i) have “consideration”; (ii) not be vague; (iii) not be entered into under duress; and (iv) illicit sexual relations (e.g., prostitution), cannot be part of the consideration.

“Consideration” in legal terms means that something, which can be very small or can be the “not doing of something” is exchanged for the promise or performance by the other party.  In drafting a contract, an attorney will make sure that there is proper “consideration.”

Today, with so many couples living together, it may be wise to enter into a written contract specifying the rights and promises of each party.

If you want to explore your rights as an unmarried partner who is living together with another party, the Badanes Law Office and David Badanes can help you. The Badanes Law Office represents clients in Suffolk County, Nassau County. Manhattan and Brooklyn.  If you need an attorney, call David Badanes and the Badanes Law Office at 631-239-1702, email at david@dbnylaw.com or visit our web site: www.dbnylaw.com.

The Badanes Law Office has offices in Northport, Garden City, Brooklyn and Manhattan.

Please like us on Facebook to get important legal news, tips and articles: www.facebook.com/BadanesLawOffice.

 

Can I Reduce My Payment of Spousal Maintenance Due to Unemployment? Video

Straight talk with David Badanes, Esq., an experienced divorce attorney on Long Island, New York.

Can I reduce my payment of spousal maintenance due to unemployment?

In New York State, if you are paying spousal maintenance and you lose your job or your income becomes less, you may ask yourself, “Can I pay less in spousal maintenance?” You have to seek the advice of an experienced Long Island divorce attorney.

It can be very difficult to pay less in spousal maintenance, however, it can be possible. You have to show your income becomes reduced or you lost your job, not because of your fault but because they are hiring fewer people or reducing their employment.

You also have to show that you are trying to get a new job and also trying to replace the income that you lost. That’s something that your attorney will show you how to prove.

New Spousal Maintenance Formula Explanation in New York

As of January 25, 2016, New York State has enacted a new spousal maintenance (alimony) law. The new law has significant changes for temporary spousal maintenance and post-divorce spousal maintenance.

This article will focus on the new formula and contains a lot of math. If you don’t like math, then consult with an attorney who can determine the amount of spousal maintenance for you.

There are two different formulas, one in the situation where the payor spouse is also paying child support and the other formula is where the payor spouse is either receive child support or not paying any amount of child support.

First, consider the situation where the payor spouse is also paying child support:

  1. The starting point is your gross yearly income. From your gross you can subtract how much you paid in Social Security taxes and Medicare taxes and in certain situations some other limited deductions.
  2. There is an income cap of $175,000.00. This means that if your income is greater than $175,000, only $175,000 is plugged into the formula. Note that every two years, this income cap can change based on the consumer price index.
  3. Now compute 20% of the Payor’s income and 25% of the Payee’s income. As one example, if the Payor’s income is $100,000, then the result is $20,000, and if the Payee’s income is $50,000, then that results in $12,500.
  4. Subtract 25% of the Payee’s income from 25% of the Payor’s income. Using the example, $20,000 – $12,500 equals: $7,500.
  5. That result will be considered Result “A”.
  6. Now combine the Payor’s income and the Payee’s income. In the example, $100,000 + $50,000 equals $150,000.
  7. Multiply that amount by 40%, so in the example, $150,000 multiplied by 40% equals $60,000.
  8. Take that result and subtract the Payee’s income, in the example $60,000 – $50,000 equals $10,000. That result is considered Result “B”.
  9. The amount of spousal maintenance is the lessor of Result “A” and Result “B”. In this example $7,500 per year.

Now, consider the situation where the payor spouse is either receiving child support or not paying any amount of child support:

  1. Again, the starting point is your gross yearly income. From your gross you can subtract how much you paid in Social Security taxes and Medicare taxes and in certain situations some other limited deductions.
  2. There is an income cap of $175,000.00. This means that if your income is greater than $175,000, only $175,000 is plugged into the formula. Note that every two years, this income cap can change based on the consumer price index.
  3. Now compute 30% of the Payor’s income and 20% of the Payee’s income. As one example, if the Payor’s income is $100,000, then the result is $30,000, and if the Payee’s income is $50,000, then that results in $10,000.
  4. Subtract 30% of the Payee’s income from 20% of the Payor’s income. Using the example, 30,000 – $10,000 equals: $20,0000.
  5. That result will be considered Result “A”.
  6. Now combine the Payor’s income and the Payee’s income. In the example, $100,000 + $50,000 equals $150,000.
  7. Multiply that amount by 40%, so in the example, $150,000 multiplied by 40% equals $60,000.
  8. Take that result and subtract the Payee’s income, in the example $60,000 – $50,000 equals $10,000. That result is considered Result “B”.
  9. The amount of spousal maintenance is the lessor of Result “A” and Result “B”. In this example $10,000 per year.

The length of time for post-divorce maintenance is now determined by a formula. That formula is as follows:

  1. If the length of the marriage was between 0 years and 15 years, the duration of maintenance is 15% to 30% of the length of the marriage.
  2. If the length of the marriage was between 15 years and 20 years, the duration of maintenance is 30% to 40% of the length of the marriage.
  3. If the length of the marriage was greater than 20 years, the duration of maintenance is 35% to 50% of the length of the marriage.

So if your marriage was 10 years, the guideline duration of post-divorce maintenance would be between 1.5 years and 3 years.

If your marriage was 20 years, the guideline duration of post-divorce maintenance would be between 6 years and 8 years.

If your marriage was 30 years, the guideline duration of post-divorce maintenance would be between 10.5 years and 15 years.

The Court can deviate from the duration formula based on several factors.

If you are getting divorced and you have questions about how the new spousal maintenance law affects you, the Badanes Law Office can help you. Call David Badanes and the Badanes Law Office today at 631-239-1702, email at david@dbnylaw.com or visit our web site: www.dbnylaw.com. The Badanes Law Office has offices in Northport, Suffolk County and Garden City, Nassau County.

Please like us on Facebook to get important legal news, tips and articles: www.facebook.com/BadanesLawOffice.

New Spousal Maintenance Laws in New York

As of January 25, 2016, New York State has enacted a new spousal maintenance (alimony) law. The new law has significant changes for temporary spousal maintenance and post-divorce spousal maintenance.

Temporary spousal maintenance is the amount of maintenance that is paid or received while the divorce is pending, post-divorce spousal maintenance is the amount of maintenance that is paid or received after the divorce is granted.

Prior to the new law, only temporary spousal maintenance had a formula to calculate the amount of maintenance to be paid. Now, the formula is the same for both temporary and post-divorce spousal maintenance. It is important to note, that both the former law and the new law state that the result of the formula is a “guideline” and that the Court can deviate from the formula if it finds the guideline amount to be “unjust or inappropriate” after considering several factors.

The formula is a bit complicated and is described in detail in another article. Here are a few important things to know:

  1. There are two different formulas, one in the situation where the payor spouse is also paying child support and the other formula is where the payor spouse is either receive child support or not paying any amount of child support. Generally, in situations where the payor spouse is also paying child support, the formula will result in a lower amount then in situations where the payor spouse is either receiving child support or not paying any child support. Therefore, the Court recognizes that in general terms, a spouse who is also paying child support has less available money to pay spousal maintenance.
  1. The formula has an income cap of $175,000. This means that if your income is greater than $175,000, only $175,000 is plugged into the formula. Note that every two years, this income cap can change based on the consumer price index. If one of the spouses’ incomes is greater than $175,000, the Court will first use the formula (with the cap) and then can award additional maintenance based on several factors.
  1. Temporary maintenance is just that, it must end upon the issuance of the Judgment of Divorce or the death of either party, whichever occurs first. Furthermore, the Court may order no amount of temporary maintenance or for the amount of temporary maintenance to be paid for a shorter period of time than the duration of the divorce litigation. This recognizes that some divorces can take a long time and that it would not be correct to award temporary maintenance for the entire length of the litigation.
  1. The parties can opt-out of either the temporary maintenance or the post-divorce maintenance formula. This would be done in a written agreement. Therefore, you and your spouse can agree to an amount of maintenance that is different than what the formula would suggest.
  1. The length of time for post-divorce maintenance is now determined by a formula. That formula is as follows:

a. If the length of the marriage was between 0 years and 15 years, the duration of maintenance is 15% to 30% of the length of the marriage.

b. If the length of the marriage was between 15 years and 20 years, the duration of maintenance is 30% to 40% of the length of the marriage.

c. If the length of the marriage was greater than 20 years, the duration of maintenance is 35% to 50% of the length of the marriage.

The Court can deviate from the duration formula based on several factors.

If you are getting divorced and you have questions about how the new spousal maintenance law affects you, the Badanes Law Office can help you. Call David Badanes and the Badanes Law Office today at 631-239-1702, email at david@dbnylaw.com or visit our web site: www.dbnylaw.com. The Badanes Law Office has offices in Northport, Suffolk County and Garden City, Nassau County.

Please like us on Facebook to get important legal news, tips and articles: www.facebook.com/BadanesLawOffice.

Are Alimony Payments Deductible in New York?

bad alimonyAlimony is sometimes also called “spousal maintenance” or “spousal support” payments. Regardless of its name, alimony payments are deductible in New York. However, it is important that your divorce agreement (usually called the Stipulation of Settlement) explicitly states that any alimony payments made are deductible.

You should always make your alimony payments by check and not in cash. You should always keep a record of your alimony payments.

When you submit your tax returns or consult with your accountant, make sure to inform your accountant that you have made alimony payments.

If you are getting divorced and need more information about alimony (spousal maintenance or spousal support), please call David Badanes and the Badanes Law Office. David Badanes and the Badanes Law Office have helped numerous individuals with their divorce. Contact the Badanes Law Office today at 631-239-1702 or email us at david@dbnylaw.com. The Badanes Law Office has two offices in Long Island: Northport and Garden City.

If you like our articles, you will find our eBook helpful too:

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