divorce tax issues - september 2016

DIVORCE

TAX ISSUES

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Taxable



TaxableNot Taxable



TaxableNot TaxableRecapture


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Takes about 4 1/2 minutes.

https://www.youtube.com/watch?v=pxrsi4-ABQ8



ALIMONY

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DEDUCTIBLETO

PAYOR

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ALIMONY


TAXABLETO

PAYEE


NOT TAXABLE


CHILDSUPPORT


NOT TAXABLE


PROPERTYSETTLEMENTS


PROBLEM


ALIMONYLOOKS LIKEPROPERTY

SETTLEMENT



RECAPTURE


RECAPTURE


TAXABLETO

PAYOR


RECAPTURE


DEDUCTIBLETO

PAYEE



LOOKBACKIN

YEAR 3


RECAPTURE


DECREASE>

$15,000


EXAMPLE


Year 1 $100,000Year 2 $75,000Year 3 $40,000


YEAR 3 DECREASE


$75,000 - $40,000=

$35,000


YEAR 2 RECAPTURE


$35,000 - $15,000=

$20,000


YEAR 1 RECAPTURE


AVERAGEYEAR 2 AND 3


YEAR 2 ADJUSTED


$75,000 - $20,000=

$55,000


YEAR 2 -3 AVERAGE


Year 2 $55,000Year 3 $40,000Average $47,500


YEAR 2 DECREASE


$100,000 - $47,500=

$52,500


YEAR 1 RECAPTURE


$52,500 - $15,000=

$37,500


TOTAL RECAPTURE


Year 1 $37,500Year 2 $20,000

= $57,500



PAYORHAS

INCOME



PAYEEHAS

DEDUCTION


R e c a p o f w h a t w e c o v e r e d :

Alimony is taxable




Alimony is taxableChild support andproperty settlementsare not




Alimony is taxableChild support andproperty settlements are notWatch out for recapture



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divorce tax issues - september 2016

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