This screen provides links to a number of tools that rarely apply. They are all helpful only if alimony is deductible to the payer and included in the income of the recipient.
This has not been the case at the federal level since 2019, and so very few alimony orders today have any tax impact.
A few states still allow alimony to have tax impact, and so these tools are still applicable if you live in one of those states.
Below is a description of the tools you will find.
Alimony After Tax
This calculator shows the tax impact of alimony for both parties.
As is indicated above, there is currently usually no federal tax impact, and also no state tax impact unless you are in one of the states that still allows alimony to be deducted.
Alimony Recapture in this Case.
This screen shows the alimony recapture, if any, in this case.
The recapture rules cause alimony that had been deducted to be included in tax, if the structure of the alimony is such that the alimony paid could be recharacterized as a property settlement.
The determination is made solely by looking at the first three years of alimony payments, and how steeply they decline from the first year to the second year, second year to third year, and first year to third year.
This screen shows whether this penalty applies, given the alimony payments in this case.
There will be no recapture tax for alimony under agreements entered into in 2019 or later.
Alimony Recapture Calculator.
A calculator for alimony recapture in general.
This calculator lets you enter the alimony in the first three years, and shows what the recapture would be.
It is a “what if” calculator.
It assumes that all alimony is taxable to the recipient and deductible to the payer.
For agreements entered into in 2019 or later, recapture will not apply, and this calculator also will not apply.
Alimony After-tax Multi-Year.
This shows the aggregate after-tax cost of alimony over all payments projected to be made.
If alimony is projected to step down over time, those step-downs are taken into account.
Alimony Trade-Off.
This screen shows the combination of child support and alimony that minimizes taxes.
This is useful in situations where people can reasonably shuffle funds between alimony and child support, and want to pick the option that minimizes overall taxes.
For agreements entered into after 2019, this is not a useful tool, as neither alimony nor child support will have any tax effects.
Its use is also limited if the alimony and child support amounts will be four different terms, or you want to have step downs of one or the other.
For earlier agreements that are modified in or after 2019, for alimony and support would end at the same time, and you do not have step-downs, it could still be useful.
What you do is to enter the combined total of cash to be paid as alimony and/or child support, and the software figures out the best split, for tax purposes, between alimony and child support.
Most of the time, the best split is 100% alimony / 0% child support, because alimony was tax-deductible.
Family Support.
This calculator shows the impact of designating all support as alimony.
For agreements entered into after 2019, this is not a useful tool, as neither alimony nor child support will have any tax effects.
For earlier agreements that are modified in or after 2019, it could still be useful.