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Term Definition Recapture - refers to the IRS’s ability to capture taxes on income distributed as part of a divorce agreement.
Application in Divorce The term recapture refers to the ability of the alimony. Recapture applies to alimony payments when the alimony paid decreases by more than $15,000 annually within a three-year period after a divorce. Alimony is tax deductible to the file an amended return, and an equally substantial retroactive tax bill to the payor.

For example, when Rufus and Rhonda went separate ways, he paid her $60,000 in alimony the first year and $30,000 in the second and then $1,000 in the third year. Between the first and second years, Rufus’s alimony payments dropped $30,000, and between the second and third, $29,000. In other words, the alimony dropped more than $15,000 annually. The result is bad news for Rufus; he must recapture some $50,000 and pay them back to the I.R.S.

The I.R.S. rules describing recapture are complicated and the domain of a tax accountant.

Some divorcing couples use declining benefit and at the same time avoid the risk of recapture.

The perils of recapture can be avoided by consulting a certified divorce planner (CDF).

See Alimony.

See also Certified Divorce Planner (CDF).