Recapture of alimony tax deduction

Alimony paid from one spouse to another is normally taxable to the receiving spouse and deductible to the paying spouse as long as the spouses live apart and the alimony dictated by court order ends upon the death of either party.

Because the IRS doesn’t want a divorcing couple to reduce their total tax bill to the government by treating what really is property distribution (which is not taxable to one spouse and deductible by the other) as alimony, they came up with a “recapture” rule.

The recapture rule looks at the alimony paid in the first three years after the final judgment of divorce. If in year 2, there is at least $15,000 more in alimony paid than in year 3, the taxes on the excess amount will be charged back to the paying spouse and will be taxed to that spouse in year 3.

In addition, if the alimony paid in year 1 is at least $15,000 more than the average of the alimony paid in years 2 and 3, the amount in excess will also be charged back as income to the paying spouse in year 3.

If you are not an accounting or math person, you probably have stopped reading by now, but the bottom line is: If you are planning to pay more alimony in the early years than in later years after your divorce is final, you may not be able to take advantage of the tax-deductibility of alimony.