Alimony Recapture Calculator

What Is Alimony Recapture?

Alimony recapture is a tax rule under IRC Section 71(f). It was created to prevent people from disguising property settlements as alimony to get larger tax deductions in the early years after divorce.

If alimony payments decrease sharply during the first three post-separation years, the IRS may treat part of the earlier payments as improper alimony.

When recapture applies:

• The payer must include the recaptured amount as income in Year 3.
• The recipient can deduct the same amount in Year 3.

It is essentially a tax correction.

Important: Does Recapture Still Apply After 2018?

The Tax Cuts and Jobs Act (TCJA) changed alimony taxation.

• For agreements executed before January 1, 2019 → Alimony is deductible by the payer and taxable to the recipient. Recapture rules apply.
• For agreements executed on or after January 1, 2019 → Alimony is not deductible and not taxable. Recapture does not apply.

If your agreement was modified after 2018, you must check whether the modification adopted the new law.

An Alimony Recapture Calculator usually starts by asking for the agreement date for this reason.

When Does Alimony Recapture Trigger?

Recapture applies only if:

1. The divorce or separation agreement was executed between 1985 and December 31, 2018.
2. Alimony payments decrease significantly in the first three years.
3. No exception applies.

The IRS looks at:

• Year 1 payments
• Year 2 payments
• Year 3 payments

If payments drop by more than $15,000 beyond certain thresholds, recapture may be triggered.

How the Alimony Recapture Calculation Works

The calculation happens in two stages:

Step 1: Calculate Year 2 Excess

Year 2 Excess =
Year 2 Alimony − (Year 3 Alimony + $15,000)

If the result is negative, it becomes zero.

Step 2: Calculate Year 1 Excess

First adjust Year 2:

Adjusted Year 2 = Year 2 − Year 2 Excess

Then:

Year 1 Excess =
Year 1 − [(Adjusted Year 2 + Year 3) ÷ 2 + $15,000]

If negative, it becomes zero.

Step 3: Total Recapture

Total Recapture =
Year 2 Excess + Year 1 Excess

If the total is greater than zero, recapture is triggered.

Example: Simple Recapture Scenario

Let’s say:

• Year 1: $60,000
• Year 2: $50,000
• Year 3: $10,000

Because Year 3 drops sharply, the formula will likely generate a recapture amount.

The calculator will:

• Identify Year 2 excess
• Adjust Year 2
• Compute Year 1 excess
• Combine both amounts

If the result equals $25,000, the payer must report $25,000 as income in Year 3.

Child Support Must Be Subtracted First

The IRS treats child support differently from alimony.

If payments include child support:

• Child support is applied first.
• Only the remaining amount counts as alimony.

For example:

• Total paid: $40,000
• Child support: $15,000
• Alimony: $25,000

The calculator must subtract child support before running recapture formulas.

Exceptions to Alimony Recapture

Recapture does not apply if:

• Either spouse dies before the end of Year 3
• The recipient remarries and payments stop
• Payments were made under a temporary support order
• Payments vary because they are tied to income or business performance

If any of these exceptions apply, recapture is prevented even if payments drop sharply.

A well-designed calculator includes checkboxes for these exceptions.

What the Alimony Recapture Calculator Does

A proper calculator will:

1. Ask for agreement date
2. Collect Year 1, Year 2, and Year 3 payments
3. Subtract child support
4. Apply the $15,000 floor rule
5. Calculate:
   • Year 2 Excess
   • Year 1 Excess
   • Total Recapture
6. Show tax impact summary
7. Indicate whether recapture is triggered

It automates a multi-step IRS formula and reduces calculation errors.

Why the $15,000 Rule Matters

The IRS allows up to a $15,000 decrease without penalty.

Only decreases beyond this threshold trigger recapture.

This protects normal payment reductions while preventing front-loaded tax planning.

Tax Impact of Recapture

If recapture is triggered:

• The payer adds the recapture amount to income in Year 3.
• The recipient deducts the same amount in Year 3.

This reverses part of the earlier tax benefit.

For high-income taxpayers, this can create a significant tax bill.

Common Mistakes to Avoid

1. Forgetting to subtract child support.
2. Ignoring agreement date.
3. Not checking exceptions.
4. Misunderstanding which year is “Year 1.”
   Year 1 means the first calendar year alimony payments were made after separation.

Small input mistakes can produce large calculation errors.

Who Should Use an Alimony Recapture Calculator?

• Divorced individuals with pre-2019 agreements
• CPAs reviewing past returns
• Divorce attorneys structuring settlement terms
• Financial planners analyzing post-divorce tax strategy

If payments were steady for three years, recapture likely does not apply. But if payments dropped sharply, it’s worth checking.

Is the Calculator Enough?

An online calculator gives a strong estimate. However:

• IRS Publication 504 provides official guidance.
• Complex cases may require professional review.
• State tax treatment may differ from federal rules.

Think of the calculator as a screening tool, not a final tax opinion.