Tiffany and her husband were legally divorced in 2017. After the divorce, Tiffany retained physical custody of their children. Tiffany received the following amounts from her ex-husband, on behalf of the children or as ordered by the court through a divorce decree:

Question

Court-ordered child support of $2,000 per month.
Court-ordered alimony of $1,000 per month.

Answer 1

In the context of this situation, it's important to differentiate between child support and alimony for tax purposes and legal implications.

1. Child Support:

   • Court-ordered child support payments (in this case, $2,000 per month) are not considered taxable income for Tiffany. She does not have to report these amounts as income on her tax return, nor does she receive any tax deduction for making those payments.

2. Alimony:

   • The tax treatment of alimony has changed with the Tax Cuts and Jobs Act (TCJA) that was enacted in December 2017. Since Tiffany's divorce was finalized before this legislation took effect, the old rules still apply to her.
   • Under the old rules, alimony payments are considered taxable income for the recipient. Therefore, Tiffany must report the alimony payment of $1,000 per month as income on her tax return. Furthermore, she could potentially deduct any alimony payments she makes to her ex-husband, but this isn't relevant since she is the recipient, not the payer.

3. Total Income:

   • For Tiffany's tax purposes, she would add the alimony payments to her other sources of income when filing her taxes. The total amount she would report from the alimony would be $12,000 for the year ($1,000 x 12 months).

In summary:

• Tiffany does not report child support as income.
• Tiffany reports alimony as taxable income, totaling $12,000 for the year.