Alimony recapture

The IRS has specific tax rules that govern the paying of alimony. One thing they are trying to avoid is divorcing couples dividing their property by calling it alimony so that the person with the higher tax bracket can get a tax deduction.

To avoid this, the IRS says that alimony should not drop from one year to the next by more than $15,000 within the first three years after divorce or they will not classify it as alimony. Then, the person who had been taking the deduction will have to re-capture all those tax deductions and pay them back to the IRS. This is called "Alimony recapture."

Understand difference between modifiable and non-modifiable alimony

It is common to see a final divorce order that specifies how much alimony is to be paid. It may not specify how long it is to be paid. In this case, either spouse can come back at any time and ask that the alimony be modified - either up or down. A wife may need more or continued alimony and the husband may wish to have it lowered or stopped completely.

Non-modifiable alimony means just that. The divorce decree will state how much and how long and nobody may change it later. This may create a hardship on either party in the case of a disability. It also means that the alimony has to continue even if the receiving spouse gets married before the end of the agreed upon term.

Tax issues with alimony

Remember, alimony is taxable to the person who receives it and tax-deductible by the person who pays it. Some creativity can be used to offset the higher tax bracket of the paying spouse with the lower tax bracket of the recipient to end up with more dollars in the pockets of both spouses.

Temporary support

If you are the lower-earning spouse or the stay-at-home custodial parent, you may be entitled to temporary support. This is to be used to pay bills for ordinary living expenses while your case is being settled. It does not necessarily determine the amount of alimony and child support you will receive after your case is final.

Prepare detailed expenses

The one area that may be argued about the most is the expenses for each spouse. (This may be one of the reasons you are getting divorced in the first place!) Show your actual expenses as you confirm them through check registers and credit card statements. This is to support why your expenses are so high in certain areas.

Make a detailed list of assets and debts
When you have your first appointment with an attorney, be prepared with detailed lists. Don't guess. That wastes your time and theirs, and costs you extra money. It is also important to list debts. Be sure to list the loans from Mom and Dad.

Accumulate cash

Once you think a divorce is looming, start putting away bits of cash. You mayneed to hire an attorneyand/or other experts and you will need the money to pay them.

Gather Information
Many times one spouse doesn't know what the other spouse is doing- concerning income, expenses, investments, insurance, loan applications, the familyl business - you get the picture. Gather as much information as possible. Every piece of the puzzle heops put together the complete picture

Get copies of everything
It's amazing how documents disappear once divorce is being discussed. If you have to get these documents later through your attorney, it can be very costly. Get them up front. copy bank and credit card statements, loan applications, financial reports, check registers, investment reports, - in other words, everything that can have a bearing on your financial situation.

Do you have questions about alimony, child support, retirement plans, and going to court? That’s why I have created this message board. You’re about to discover secrets of getting through your divorce and protect yourself financially.

The unfortunate sad truth is over 1,200,000 married couples head down this sad and painful path every year! Statistics show that divorce directly affects over 4,000,000 people – husbands, wives, children, co-workers - every year! Some are taken by surprise, and never fully recover.