Question

Alimony recapture may occur if there is a substantial decrease in the amount of the alimony payments in the second year. What is alimony recapture?

1) A legal process to recover unpaid alimony
2) A tax provision that requires the payer of alimony to report certain payments as income
3) A situation where the recipient of alimony must pay back a portion of the alimony received
4) A term used to describe the termination of alimony payments after a certain period of time

Answer 1

Alimony recapture is a tax provision targeting substantial decreases in alimony payments, requiring the payer to include previously deducted amounts as income. The correct answer to what alimony recapture is: 2) A tax provision that requires the payer of alimony to report certain payments as income.

Step-by-step explanation:

Alimony recapture is a tax provision that requires the payer of alimony to report certain payments as income. This situation occurs when there is a substantial decrease in alimony payments in the years following the divorce. Specifically, it happens when payments decrease significantly in the second or third year. The Internal Revenue Service (IRS) may consider this a red flag that the initial payments were front-loaded or disguised as property settlement. Thus, alimony recapture ensures that the payer does not receive a tax deduction for amounts that were not truly alimony.