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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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.

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