Divorce Settlement Tip # 8: Alimony Recapture Calculations
As a family law attorney, you know that alimony recapture is the big bad wolf of the divorce world—particularly for the payor. It comes into effect when alimony payments end, or decrease substantially, during the first three calendar years of alimony payments—triggering a transfer of some portion of the previous two years’ alimony tax break from payor to recipient.
For the payor, the tax break – considered a loophole by the U.S. tax code—gets partially negated. Bad news. For the recipient, it’s a gain. Still, it’s good to know what to expect.
Of course, alimony is a fully negotiated amount – in all 50 states. You can structure the payments however you like – so long as both parties agree. The key is to avoid structuring the alimony payments – however inadvertently – to trigger a recapture. You don’t want your client to be taken by surprise by an unexpected tax liability.
On the other hand, if your client is the recipient, this would be good news. Either way, it’s good to know what’s up.
Luckily, Easy Soft’s Divorce Financials software is intelligent enough to flag a payment scenario that would trigger an alimony recapture. When this happens, the software will notify the user, and bingo! No more surprises down the line.
Our easy-to-use, well reviewed and popular family law software makes it easy to encourage favorable situations, and avoid unpleasant or unexpected situations—or at least plan for them far in advance.
To learn more about our divorce software for attorneys, call Easy Soft at 800 905 7638.