Question

Marisa has gathered a pile of financial documents from the past year showing money she has taken in. She received money from alimony, child support, investment income, and unemployment compensation. She totals it all up to try to determine her gross income, but you know that she is making a mistake. What would you tell Marisa so she can correct her total?


Child support is not included in gross income calculations.


Investment income is not included in gross income calculations.


Unemployment compensation is not included in gross income calculations.


Alimony is not included in gross income calculations.

Answer 1

Tell Marisa that she should not simply add every dollar she received — some receipts are not taxable and others are. Correct answers:

- Child support: NOT included in gross income. Child support payments are nontaxable to the recipient.
- Investment income: INCLUDED in gross income. Taxable investment receipts (interest, taxable dividends, taxable capital gains) are part of gross income.
- Unemployment compensation: INCLUDED in gross income. Unemployment benefits are generally taxable and must be included.
- Alimony: Depends on the date of the divorce/separation instrument. For agreements executed on or before Dec. 31, 2018, alimony received is generally included in the recipient’s gross income. For agreements executed after Dec. 31, 2018, alimony is not taxable to the recipient (and not deductible by the payor) under the TCJA.

Also tell her to use the tax forms she received (W-2, 1099‑INT/1099‑DIV, 1099‑B, 1099‑G, 1099‑MISC/NEC, etc.) to identify taxable vs. nontaxable items when computing gross income. If she’s unsure about her alimony situation, check the divorce instrument date or ask a tax professional.